Docoh
Loading...

COMM 2012-LC4 Mortgage Trust

Filed: 18 Mar 12, 8:00pm
 
 
 FILED PURSUANT TO RULE 424(b)(5)
 REGISTRATION STATEMENT NO.: 333-172143-03
 
 
PROSPECTUS SUPPLEMENT
(to Prospectus dated March 1, 2012)
 
$829,492,000 (Approximate)
COMM 2012-LC4
Commercial Mortgage Pass-Through Certificates

 German American Capital Corporation
Ladder Capital Finance LLC
Guggenheim Life and Annuity Company
Sponsors and Mortgage Loan Sellers

Deutsche Mortgage & Asset Receiving Corporation
Depositor
COMM 2012-LC4 Mortgage Trust
Issuing Entity

The COMM 2012-LC4 Commercial Mortgage Pass-Through Certificates will represent beneficial ownership interests in the issuing entity, COMM 2012-LC4 Mortgage Trust.  The issuing entity’s assets will primarily be 43 fixed-rate mortgage loans, secured by first liens on 67 commercial, multifamily and manufactured housing community properties.  The COMM 2012-LC4 Commercial Mortgage Pass-Through Certificates will represent interests in the issuing entity only and will not represent the obligations of Deutsche Bank AG, Deutsche Mortgage & Asset Receiving Corporation, the sponsors or any of their respective affiliates, and neither the certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency.
 
Each class of certificates offered hereby will receive distributions of interest, principal or both on the fourth business day following the sixth day of each month or the following business day, commencing in April 2012.  Credit enhancement will be provided by certain classes of subordinate certificates that will be subordinate to certain classes of senior certificates as described in this prospectus supplement under “Description of the Offered Certificates—Subordination.”

Certain characteristics of the certificates offered by this prospectus supplement include:
 
Class
 
 
Initial Certificate Balance or Notional Balance(1)
 
 
Approximate Initial
Pass-Through Rate
 
 
Assumed Final
Distribution Date(2)
Class A-1 $48,958,000  1.156% July 2016
Class A-2 $77,841,000  
2.256%
 March 2017
Class A-3 $115,586,000  
3.069%
 July 2021
Class A-4 $416,502,000  
3.288%
 January 2022
Class A-M $92,950,000  
4.063%
 February 2022
Class B $44,711,000  
4.934%(3)
 February 2022
Class C $32,944,000  
5.825%(4)
 February 2022

(Footnotes to table to begin on page xii)
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined that this prospectus supplement or the accompanying prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
Investing in the certificates offered in this prospectus supplement involves risks.  See “Risk Factors” beginning on page S-35 of this prospectus supplement and page 11 of the prospectus.
 
With respect to this offering, Deutsche Bank Securities Inc. is acting as the sole bookrunner and lead manager with respect to each class of offered certificates. Ladder Capital Securities LLC, Guggenheim Securities, LLC, Morgan Stanley & Co. LLC and RBS Securities Inc. are acting as co-managers. The underwriters will offer the certificates offered by this prospectus supplement, in the amounts set forth in this prospectus supplement, to the public in negotiated transactions or otherwise at varying prices to be determined at the time of sale.
 
Deutsche Bank Securities Inc., Ladder Capital Securities LLC, Guggenheim Securities, LLC, Morgan Stanley & Co. LLC and RBS Securities Inc. are required to purchase the certificates offered by this prospectus supplement (in the amounts to be set forth under “Method of Distribution (Underwriter Conflicts of Interest)” in this prospectus supplement) from Deutsche Mortgage & Asset Receiving Corporation, subject to certain conditions.  Deutsche Mortgage & Asset Receiving Corporation expects to receive from the sale of the offered certificates approximately 100.78% of the initial aggregate certificate balance of the offered certificates, plus accrued interest, before deducting expenses payable by it.  The underwriters expect to deliver the certificates offered in this prospectus supplement to purchasers on or about March 20, 2012.
 
Deutsche Bank Securities
Sole Bookrunner and Lead Manager
 
Ladder Capital Securities   Guggenheim Securities
    
Morgan Stanley  RBS
 
Co-Managers
 
March 1, 2012
 
 
 

 
 
(MAP)
 
 
 

 
 
TABLE OF CONTENTS
       
EXECUTIVE SUMMARY xii Some Mortgaged Properties May Not  
SUMMARY S-1 Be Readily Convertible to  
RISK FACTORS S-35 Alternative Uses S-43
General Risks S-35 Limitations of Appraisals S-43
The Offered Certificates May Not   Property Value May Be Adversely  
Be a Suitable Investment for   Affected Even When Current  
You S-35 Operating Income Is Not S-44
Risks Related to Market Conditions S-35 Risks Related to Tenants S-44
The Credit Crisis and Downturn in   Tenant Concentration Entails Risk . S-44
the Real Estate Market Have   Mortgaged Properties Leased to  
Adversely Affected the Value of   Multiple Tenants Also Have  
Commercial Mortgage-Backed   Risks S-45
Securities S-35 Mortgaged Properties Leased to  
The Volatile Economy and Credit   Borrowers or Borrower Affiliated  
Crisis May Increase Loan   Entities Also Have Risks S-45
Defaults and Affect the Value   Certain Additional Risks Related to  
and Liquidity of Your   Tenants S-46
Investment S-36 Tenant Bankruptcy Entails Risks S-48
Heightened Underwriting Standards   Risks Related to Mortgage Loan  
May Contribute to Losses on   Concentration S-48
Commercial Loans S-36 Risks Related to Borrower  
Global Market Disruptions and   Concentration S-49
Recent U.S. Legislation May   Risks Relating to Property Type  
Adversely Affect the Availability   Concentration S-49
of Credit for Commercial Real   Geographic Concentration Exposes  
Estate S-37 Investors to Greater Risk of Default  
General Conditions in the   and Loss S-50
Commercial Real Estate   Certain Mortgage Loans Were Not  
Mortgage Markets May   Specifically Originated for  
Adversely Affect the   Securitization S-51
Performance of the Offered   Seasoned Mortgage Loans Present  
Certificates S-38 Additional Risks of Repayment S-52
RISKS RELATED TO THE MORTGAGE   Retail Properties Have Special Risks S-52
LOANS S-39 The Presence or Absence of an  
Mortgage Loans Are Nonrecourse and   “Anchor Tenant” May Adversely  
Are Not Insured or Guaranteed S-39 Affect the Economic  
The Offered Certificates Are Limited   Performance of a Retail  
Obligations and Payments Will Be   Property S-52
Primarily Derived from the Mortgage   Current Levels of Property Income  
Loans S-39 May Not Be Maintained Due to  
Commercial Lending Is Dependent upon   Varying Tenant Occupancy S-54
Net Operating Income S-40 Competition May Adversely Affect  
Mortgage Loans Have Not Been   the Performance of the  
Reunderwritten Since Origination S-42 Mortgaged Property S-54
The Prospective Performance of the   Certain Risks of Restaurant  
Commercial and Multifamily   Tenants S-55
Mortgage Loans Included in the   Certain Risks of Health Club or  
Issuing Entity Should Be Evaluated   Exercise Studio Space Tenants S-55
Separately from the Performance of   Certain Risks of Movie Theater  
the Mortgage Loans in Any of the   Tenants S-56
Depositor’s Other Trusts S-42 Office Properties Have Special Risks S-56
    Multifamily Properties Have Special  
    Risks S-57
 
 
iii

 
 
State Regulations and Government   Maturity Date or Anticipated  
Subsidies May Affect a   Repayment Date S-71
Borrower’s Ability To Repay a   Risks Relating to Borrower Organization  
Multifamily Mortgage Loan S-58 or Structure S-72
Manufactured Housing Community   Delaware Statutory Trusts May Hinder  
Properties Have Special Risks S-59 Recovery S-73
Hospitality Properties Have Special   Risks Related to Additional Debt S-73
Risks S-59 Bankruptcy Proceedings Entail Certain  
The Seasonality of Business May   Risks S-74
Create Shortfalls in Hospitality   Risks Related to Loan Sponsor  
Revenue S-60 Guaranties S-75
The Inability to Maintain a Liquor   Lack of Skillful Property Management  
License May Adversely Impact   Entail Risks S-76
Hospitality Revenue S-61 Risks of Inspections Relating to  
The Performance of a Hospitality   Property S-76
Property Depends in Part on   World Events and Natural (or Other)  
the Performance of Its   Disasters Could Have an Adverse  
Management Company S-61 Impact on the Mortgaged Properties  
Industrial Properties Have Special Risks S-62 and Could Reduce the Cash Flow  
Risks Related to Loans Secured by   Available To Make Payments on the  
Mortgaged Properties Located in   Certificates S-76
Puerto Rico S-62 Inadequate Property Insurance  
Risks of Co-Tenancy and Other Early   Coverage Could Have an Adverse  
Termination Provisions in Retail and   Impact on the Mortgaged Properties S-77
Office Leases S-63 Certain Risks Are Not Covered  
Condominium Properties Have Special   under Standard Insurance  
Risks S-65 Policies S-77
Risks Related to Construction,   Standard Insurance May Be  
Development, Redevelopment,   Inadequate Even for Types of  
Renovation and Repairs at   Losses That Are Insured  
Mortgaged Properties S-66 Against S-78
Options and Other Purchase Rights May   There Is No Assurance That  
Affect Value or Hinder Recovery   Required Insurance Will Be  
with Respect to the Mortgaged   Maintained S-78
Properties S-67 Risks Associated with Blanket Insurance  
The Sellers of the Mortgage Loans Are   Policies or Self-Insurance S-79
Subject to Bankruptcy or Insolvency   Availability of Terrorism Insurance S-79
Laws That May Affect the Issuing   Certain Mortgage Loans Limit the  
Entity’s Ownership of the Mortgage   Borrower’s Obligation to Obtain  
Loans S-67 Terrorism Insurance S-80
Environmental Issues at the Mortgaged   There Is No Assurance That  
Properties May Adversely Affect   Required Terrorism Insurance  
Payments on Your Certificates S-68 Will Be Maintained S-81
Certain Environmental Laws May   Appraisals and Market Studies Have  
Negatively Impact a Borrower’s   Certain Limitations S-81
Ability to Repay a Mortgage   Increases in Real Estate Taxes Due to  
Loan S-68 Termination of a PILOT Program or  
A Borrower May Be Required to   Other Tax Abatement Arrangements  
Take Remedial Steps with   May Reduce Payments to  
Respect to Environmental   Certificateholders S-81
Hazards at a Property S-69 Risks Related to Enforceability S-82
Potential Issuing Entity Liability Related   Risks Related to Enforceability of  
to a Materially Adverse   Prepayment Premiums, Yield  
Environmental Condition S-69 Maintenance Charges and  
Borrower May Be Unable To Repay the   Defeasance Provisions S-82
Remaining Principal Balance on the      
 
 
iv

 
 
The Master Servicer or the Special   RISKS RELATED TO THE OFFERED  
Servicer May Experience Difficulty   CERTIFICATES S-98
in Collecting Rents upon the Default   Legal and Regulatory Provisions  
and/or Bankruptcy of a Borrower S-82 Affecting Investors Could Adversely  
Risks Related to Mortgage Loans   Affect the Liquidity of the Offered  
Secured by Multiple Properties S-83 Certificates S-98
State Law Limitations Entail Certain   Risks Related to Prepayments and  
Risks S-84 Repurchases of Mortgage Loans S-99
Leased Fee Properties Entail Risks that   Limited Obligations S-101
May Adversely Affect Payments on   Yield Considerations S-101
Your Certificates S-84 Optional Early Termination of the  
Mortgage Loans Secured by Leasehold   Issuing Entity May Result in an  
Interests May Expose Investors to   Adverse Impact on Your Yield or  
Greater Risks of Default and Loss S-85 May Result in a Loss S-102
Potential Absence of Attornment   A Mortgage Loan Seller May Not Be  
Provisions Entails Risks S-88 Able to Make a Required  
Risks Related to Zoning Laws S-88 Repurchase or Substitution of a  
Risks Related to Litigation and   Defective Mortgage Loan S-102
Condemnation S-89 Any Loss of Value Payment Made by a  
Prior Bankruptcies, Defaults or Other   Mortgage Loan Seller May Prove to  
Proceedings May Be Relevant to   Be Insufficient to Cover All Losses  
Future Performance S-90 on a Defective Mortgage Loan S-102
Risks Relating to Costs of Compliance   Risks Related to Borrower Default S-103
with Applicable Laws and   Risks Related to Modification of  
Regulations S-90 Mortgage Loans with Balloon  
RISKS RELATED TO CONFLICTS OF   Payments S-103
INTEREST S-91 Risks Related to Certain Payments S-104
Potential Conflicts of Interest of the   Risks of Limited Liquidity and Market  
Master Servicer and the Special   Value S-104
Servicer S-91 The Limited Nature of Ongoing  
Special Servicer May Be Directed to   Information May Make It Difficult for  
Take Actions S-91 You To Resell Your Certificates S-104
Potential Conflicts of Interest of the   Risks Related to Factors Unrelated to  
Operating Advisor S-92 the Performance of the Certificates  
Potential Conflicts of Interest of the   and the Mortgage Loans, Such as  
Underwriters and Their Affiliates S-93 Fluctuations in Interest Rates and  
Potential Conflicts of Interest in the   the Supply and Demand of CMBS  
Selection of the Underlying   Generally S-105
Mortgage Loans S-94 Credit Support May Not Cover All Types  
Related Parties May Acquire Certificates   of Losses S-105
or Experience Other Conflicts S-95 Disproportionate Benefits May Be Given  
Related Parties’ Ownership of   to Certain Classes S-105
Certificates May Impact the   The Amount of Credit Support Will Be  
Servicing of the Mortgage   Limited S-106
Loans and Affect Payments   REMIC Status S-106
under the Certificates S-95 State and Local Tax Considerations S-106
Conflicts of Interest May Arise in   Certain Federal Tax Consideration  
the Ordinary Course of the   Regarding Original Issue Discount S-107
Servicers’ Businesses in   Tax Considerations Related to  
Servicing the Mortgage Loans S-95 Foreclosure S-107
Conflicts of Interest May Arise Due   Changes in REMIC Restrictions on Loan  
to the Activities of the Sponsors S-96 Modifications May Impact an  
Conflicts Between Property Managers   Investment in the Certificates S-107
and the Borrowers S-97 Risk of Limited Assets S-108
Other Potential Conflicts of Interest S-97    
 
 
v

 
 
Risks Relating to Lack of   Security for the Mortgage Loans S-152
Certificateholder Control over the   Significant Mortgage Loans and  
Issuing Entity S-108 Significant Obligors S-153
Different Timing of Mortgage Loan   Certain Underwriting Matters S-155
Amortization Poses Certain Risks S-108 Split Loan Structures S-159
Ratings of the Offered Certificates S-109 The Pooled Component and the  
THE SPONSORS, MORTGAGE LOAN   Non-Pooled Component of the  
SELLERS AND ORIGINATORS S-111 Hartman Portfolio Mortgage  
German American Capital Corporation S-111 Loan S-159
General S-111 Additional Mortgage Loan Information S-165
GACC’s Securitization Program S-111 Certain Terms and Conditions of the  
Review of GACC Mortgage Loans S-112 Mortgage Loans S-170
GACC’s Underwriting Standards S-114 Changes in Mortgage Pool  
Compliance with Rule 15Ga-1   Characteristics S-184
under the Exchange Act S-117 DESCRIPTION OF THE OFFERED  
Ladder Capital Finance LLC S-118 CERTIFICATES S-185
General S-118 General S-185
Ladder Capital Group’s   Distributions S-186
Securitization Program S-118 Fees and Expenses S-192
Review of LCF Mortgage Loans S-119 Distributions of the Alamance  
Ladder Capital Group’s   Crossing Interest Strip S-199
Underwriting Guidelines and   Distribution of Excess Interest S-199
Processes S-121 Prepayment Premiums and Yield  
Compliance with Rule 15Ga-1   Maintenance Charges S-199
under the Exchange Act S-126 Application Priority of Mortgage  
Guggenheim Life and Annuity Company S-126 Loan Collections S-200
General S-126 Assumed Final Distribution Date S-202
GLAC’s Loan Origination and   Realized Losses S-203
Acquisition History S-127 Prepayment Interest Shortfalls S-204
Review of GLAC Mortgage Loans S-127 Subordination S-206
GLAC’s Underwriting Standards S-129 Appraisal Reductions S-206
Compliance with Rule 15Ga-1   Delivery, Form and Denomination S-210
under the Exchange Act S-134 Book-Entry Registration S-211
THE DEPOSITOR S-134 Definitive Certificates S-213
THE ISSUING ENTITY S-135 Certificateholder Communication S-213
THE SERVICERS S-136 Access to Certificateholders’  
Generally S-136 Names and Addresses S-213
The Master Servicer S-136 Special Notices S-213
The Special Servicer S-140 Retention of Certain Certificates by  
Replacement of the Special Servicer S-142 Affiliates of Transaction Parties S-214
THE TRUSTEE S-144 YIELD AND MATURITY  
Certain Matters Regarding the Trustee S-145 CONSIDERATIONS S-214
Resignation and Removal of the Trustee S-146 Yield Considerations S-214
THE CERTIFICATE ADMINISTRATOR   Weighted Average Life S-216
AND CUSTODIAN S-146 Certain Price/Yield Tables S-218
Trustee and Certificate Administrator   THE POOLING AND SERVICING  
Fee S-148 AGREEMENT S-220
PAYING AGENT, CERTIFICATE   General S-220
REGISTRAR, CUSTODIAN AND   Servicing of the Mortgage Loans;  
AUTHENTICATING AGENT S-148 Collection of Payments S-220
THE OPERATING ADVISOR S-149 The Directing Holder S-222
CERTAIN RELATIONSHIPS AND   Limitation on Liability of Directing Holder S-226
RELATED TRANSACTIONS S-150 The Operating Advisor S-227
DESCRIPTION OF THE MORTGAGE   General S-227
POOL S-151    
General S-151    
 
 
vi

 
 
Role of Operating Advisor When No   CERTAIN FEDERAL INCOME TAX  
Control Termination Event Has   CONSEQUENCES S-275
Occurred and Is Continuing S-227 General S-275
Role of Operating Advisor Only   Tax Status of Offered Certificates S-276
While a Control Termination   Taxation of Offered Certificates S-276
Event Has Occurred and Is   Further Information; Taxation of Foreign  
Continuing S-227 Investors S-277
Annual Report S-229 CERTAIN STATE AND LOCAL TAX  
Replacement of the Special   CONSIDERATIONS S-278
Servicer S-230 ERISA CONSIDERATIONS S-278
Operating Advisor Termination   METHOD OF DISTRIBUTION  
Events S-230 (UNDERWRITER CONFLICTS OF  
Rights upon Operating Advisor   INTEREST) S-280
Termination Event S-231 LEGAL INVESTMENT S-281
Termination of the Operating   LEGAL MATTERS S-282
Advisor Without Cause S-231 RATINGS S-282
Operating Advisor Compensation S-232 LEGAL ASPECTS OF MORTGAGE  
Advances S-232 LOANS IN CALIFORNIA,  
Accounts S-236 MASSACHUSETTS, TEXAS, NEW  
Enforcement of “Due-On-Sale” and   YORK AND PUERTO RICO S-283
“Due-On-Encumbrance” Clauses S-238 INDEX OF DEFINED TERMS S-287
Inspections S-239      
Insurance Policies S-239 ANNEX A-1CERTAIN  
Assignment of the Mortgage Loans S-242   CHARACTERISTICS  
Representations and Warranties;     OF THE MORTGAGE  
Repurchase; Substitution S-242   LOANS A-1-1
Certain Matters Regarding the   ANNEX A-2CERTAIN POOL  
Depositor, the Master Servicer, the     CHARACTERISTICS  
Special Servicer and the Operating     OF THE MORTGAGE  
Advisor S-244   LOANS AND  
Events of Default S-246   MORTGAGED  
Rights upon Event of Default S-247   PROPERTIES A-2-1
Waivers of Events of Default S-249 ANNEX B– DESCRIPTION OF THE  
Amendment S-249   TOP 20 MORTGAGE  
No Downgrade Confirmation S-250   LOANS OR GROUPS  
Evidence of Compliance S-252   OF CROSS-  
Voting Rights S-252   COLLATERALIZED  
Realization Upon Mortgage Loans S-252   MORTGAGE LOANS B-1
Sale of Defaulted Mortgage Loans and   ANNEX CGLOBAL CLEARANCE,  
REO Properties S-254   SETTLEMENT AND  
Modifications S-255   TAX DOCUMENTATION  
Optional Termination S-257   PROCEDURES C-1
Servicing Compensation and Payment   ANNEX DDECREMENT TABLES D 1
of Expenses S-258 ANNEX EPRICE/YIELD TABLES E 1
Special Servicing S-259 ANNEX FMORTGAGE LOAN  
Master Servicer and Special     SELLER  
Servicer Permitted To Buy     REPRESENTATIONS  
Certificates S-265   AND WARRANTIES F-1
Reports to Certificateholders; Available   ANNEX GEXCEPTIONS TO  
Information S-265   MORTGAGE LOAN  
Certificate Administrator Reports S-265   SELLER  
Information Available Electronically S-268   REPRESENTATIONS  
Other Information S-273   AND WARRANTIES G-1
Master Servicer’s Reports S-273      
Exchange Act Filings S-274      
USE OF PROCEEDS S-275      
 
 
vii

 
 
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
 
Information about the certificates offered in this prospectus supplement is contained in two separate documents that progressively provide more detail: (a) the accompanying prospectus, which provides general information, some of which may not apply to the offered certificates; and (b) this prospectus supplement, which describes the specific terms of the offered certificates. The Annexes to this prospectus supplement are incorporated into and are a part of this prospectus supplement. References in the accompanying prospectus to the prospectus supplement for the offered certificates should be interpreted to mean this prospectus supplement.
 
In addition, we have filed with the Securities and Exchange Commission a registration statement under the Securities Act of 1933, as amended, with respect to the offered certificates. This prospectus supplement and the accompanying prospectus form a part of that registration statement. However, this prospectus supplement and the accompanying prospectus do not contain all of the information contained in our registration statement. For further information regarding the documents referred to in this prospectus supplement and the accompanying prospectus, you should refer to our registration statement and the exhibits to it. Our registration statement and the exhibits to it can be inspected and copied at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission (the “SEC”) at its public reference room, 100 F Street, N.E., Washington, D.C. 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Copies of these materials can also be obtained electronically through the SEC’s internet website (http://www.sec.gov).
 
This prospectus supplement is not an offer to sell or a solicitation of an offer to buy these securities in any state where such offer, solicitation or sale is not permitted.
 
You should rely only on the information contained in this prospectus supplement and the accompanying prospectus.  We have not authorized anyone to provide you with information that is different from that contained in this prospectus supplement.  The information in this prospectus supplement is accurate only as of the date of this prospectus supplement.
 
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.
 
Certain capitalized terms are defined and used in this prospectus supplement and the accompanying prospectus to assist you in understanding the terms of the offered certificates.  The capitalized terms used in this prospectus supplement are defined on the pages indicated under the caption “Index of Defined Terms” beginning on page S-287 in this prospectus supplement.
 
In this prospectus supplement:
 
●  the terms “Depositor,” “we,” “us” and “our” refer to Deutsche Mortgage & Asset Receiving Corporation.
 
●  
references to “lender” with respect to the mortgage loans generally should be construed to mean, subsequent to the issuance of the offered certificates, the trustee on behalf of the issuing entity as the holder of record title to the mortgage loans or the master servicer or the special servicer, as applicable, with respect to the obligations and rights of the lender as described under “The Pooling and Servicing Agreement” in this prospectus supplement.
 
THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE SPONSORS, THE MORTGAGE LOAN SELLERS, THE MASTER SERVICER, THE SPECIAL SERVICER, THE TRUSTEE, THE CERTIFICATE ADMINISTRATOR, THE OPERATING
 
 
viii

 
 
ADVISOR, THE INITIAL DIRECTING HOLDER, THE UNDERWRITERS OR ANY OF THEIR RESPECTIVE AFFILIATES.  NEITHER THE OFFERED CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR PRIVATE INSURER.
 
THERE IS CURRENTLY NO SECONDARY MARKET FOR THE OFFERED CERTIFICATES.  WE CANNOT ASSURE YOU THAT A SECONDARY MARKET WILL DEVELOP OR, IF A SECONDARY MARKET DOES DEVELOP, THAT IT WILL PROVIDE HOLDERS OF THE OFFERED CERTIFICATES WITH LIQUIDITY OF INVESTMENT OR THAT IT WILL CONTINUE FOR THE TERM OF THE OFFERED CERTIFICATES.  THE UNDERWRITERS CURRENTLY INTEND TO MAKE A MARKET IN THE OFFERED CERTIFICATES BUT ARE UNDER NO OBLIGATION TO DO SO.  ACCORDINGLY, PURCHASERS MUST BE PREPARED TO BEAR THE RISKS OF THEIR INVESTMENTS FOR AN INDEFINITE PERIOD.  SEE “RISK FACTORS—RISKS RELATED TO THE OFFERED CERTIFICATES—RISKS OF LIMITED LIQUIDITY AND MARKET VALUE” IN THIS PROSPECTUS SUPPLEMENT.
 
 
ix

 
 
FORWARD-LOOKING STATEMENTS
 
This prospectus supplement and the accompanying prospectus contain certain forward-looking statements.  If and when included in this prospectus supplement, the words “expects”, “intends”, “anticipates”, “estimates” and analogous expressions and all statements that are not historical facts, including statements about our beliefs or expectations, are intended to identify forward-looking statements.  Any forward-looking statements are made subject to risks and uncertainties, which could cause actual results to differ materially from those stated.  Those risks and uncertainties include, among other things, declines in general economic and business conditions, increased competition, changes in demographics, changes in political and social conditions, regulatory initiatives and changes in customer preferences, many of which are beyond our control and the control of any other person or entity related to this offering.  The forward-looking statements made in this prospectus supplement are made as of the date stated on the cover.  We have no obligation to update or revise any forward-looking statement.
 
NOTICE TO RESIDENTS OF THE UNITED KINGDOM
 
The issuing entity described in this prospectus supplement may constitute a “collective investment scheme” as defined by Section 235 of the Financial Services and Markets Act 2000 (the “FSMA”) that is not a “recognised collective investment scheme” for the purposes of the FSMA and that has not been authorized or otherwise approved.  As an unregulated scheme, the certificates cannot be marketed in the United Kingdom to the general public, except in accordance with the FSMA.
 
The distribution of this prospectus supplement (A) if made by a person who is not an authorized person under the FSMA, is being made only to, or directed only at, persons who (i) are outside the United Kingdom, or (ii) have professional experience in matters relating to investments and qualify as investment professionals in accordance with Article 19(5) of the FSMA (Financial Promotion) Order 2001 (the “Financial Promotion Order”), or (iii) are persons falling within Article 49(2)(a) through (d) (“high net worth companies, unincorporated associations, etc.”) of the Financial Promotion Order 2001 (all such persons together being referred to as “FPO Persons”); and (B) if made by a person who is an authorized person under the FSMA, is being made only to, or directed only at, persons who (i) are outside the United Kingdom, or (ii) have professional experience in participating in unregulated collective investment schemes and qualify as investment professionals in accordance with Article 14(3) of the FSMA (Promotion of Collective Investment Schemes)(Exemptions) Order 2001 (the “Promotion of Collective Investment Schemes Exemptions Order”), or (iii) are persons falling within Article 22(2)(a) through (d) (“high net worth companies, unincorporated associations, etc.”) of the Promotion of Collective Investment Schemes Exemptions Order (all such persons together being referred to as “PCIS Persons” and, together with the FPO Persons, the “Relevant Persons”).  This prospectus supplement must not be acted on or relied on by persons who are not Relevant Persons.  Any investment or investment activity to which this prospectus supplement relates, including the offered certificates, is available only to Relevant Persons and will be engaged in only with Relevant Persons.  Any persons other than Relevant Persons should not rely on this prospectus supplement.
 
Potential investors in the United Kingdom are advised that all, or most, of the protections afforded by the United Kingdom regulatory system will not apply to an investment in the certificates and that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.
 
EUROPEAN ECONOMIC AREA
 
THIS PROSPECTUS SUPPLEMENT HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF CERTIFICATES (AS DEFINED HEREIN) IN ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A “RELEVANT MEMBER STATE”) WILL BE MADE PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS DIRECTIVE (AS DEFINED BELOW) FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF CERTIFICATES.  ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT MEMBER STATE OF CERTIFICATES WHICH
 
 
x

 
 
ARE THE SUBJECT OF AN OFFERING CONTEMPLATED IN THIS PROSPECTUS SUPPLEMENT AS COMPLETED BY FINAL TERMS IN RELATION TO THE OFFER OF THOSE CERTIFICATES MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR AN UNDERWRITER TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE IN RELATION TO SUCH OFFER.
 
NONE OF THE ISSUING ENTITY, THE DEPOSITOR AND THE UNDERWRITERS HAS AUTHORISED, NOR DOES ANY OF THEM AUTHORISE, THE MAKING OF ANY OFFER OF CERTIFICATES IN CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUING ENTITY, THE DEPOSITOR OR AN UNDERWRITER TO PUBLISH OR SUPPLEMENT A PROSPECTUS FOR SUCH OFFER.
 
FOR THE PURPOSES OF THE DISCUSSION IN THIS SECTION ENTITLED “EUROPEAN ECONOMIC AREA”, THE EXPRESSION “PROSPECTUS DIRECTIVE” MEANS DIRECTIVE 2003/71/EC (AND AMENDMENTS THERETO, INCLUDING THE 2010 PD AMENDING DIRECTIVE, TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE), AND INCLUDES ANY RELEVANT IMPLEMENTING MEASURE IN THE RELEVANT MEMBER STATE AND THE EXPRESSION “2010 PD AMENDING DIRECTIVE” MEANS DIRECTIVE 2010/73/EU.
 
 In relation to each Relevant Member State, each underwriter has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of certificates to the public in that Relevant Member State other than:
 
(a) to any legal entity which is a “qualified investor” as defined in the Prospectus Directive;
 
(b) to fewer than 100 or, if the Relevant Member State has implemented the relevant provisions of the 2010 PD Amending Directive, 150 natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the relevant underwriters nominated by the depositor for any such offer; or
 
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive;
 
provided no such offer of certificates referred to in (a) to (c) above shall require the issuing entity, the depositor or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive.
 
For the purposes of this provision, the expression an “offer of certificates to the public” in relation to any certificates in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the certificates to be offered so as to enable an investor to decide to purchase or subscribe the certificates, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State.
 
 
xi

 
 
EXECUTIVE SUMMARY
 
This Executive Summary does not include all of the information you need to consider in making your investment decision.  You are advised to carefully read, and should rely solely on, the detailed information appearing elsewhere in this prospectus supplement relating to the certificates offered by this free writing supplement and the underlying mortgage loans.
 
CERTIFICATES
 
 
Class
 
 
Initial Certificate Balance or Notional Balance(1)
 
 
Approximate Initial Credit Support(5)
 
 
Description
of Pass-
Through
Rate
 
 
Assumed Final Distribution
Date(2)
 
 
Approximate
Initial
Pass-Through
Rate
 
 
Weighted Average Life
(Yrs.)(6)
 
 
Principal Window (Mos.)(6)
Offered Certificates            
A-1
 
$48,958,000
 
30.000%(7)
 Fixed July 2016 1.156% 2.29 1-52
A-2
 
$77,841,000
 
30.000%(7)
 
Fixed
 March 2017 2.256% 4.64 52-60
A-3
 
$115,586,000
 
30.000%(7)
 
Fixed
 July 2021 3.069% 6.86 60-112
A-4
 
$416,502,000
 
30.000%(7)
 
Fixed
 January 2022 3.288% 9.60 112-118
A-M
 
$92,950,000
 20.125% 
Fixed
 February 2022 4.063% 9.82 118-119
B
 
$44,711,000
 15.375% 
Fixed(3)
 February 2022 4.934% 9.89 119-119
C
 
$32,944,000
 11.875% 
WAC(4)
 February 2022 5.825% 9.89 119-119
Non-Offered Certificates(8)
            
X-A(9) 
 
$751,837,000
 N/A 
Variable(9)
 N/A 2.720% N/A N/A
X-B(9) 
 
$189,431,016
 N/A 
Variable(9)
 N/A 0.699% N/A N/A
D
 
$52,946,000
 6.250% 
WAC(4)
 March 2022 5.825% 9.96 119-120
E
 
$15,296,000
 4.625% 
Fixed
 March 2022 4.250% 9.97 120-120
F
 
$11,766,000
 3.375% 
Fixed
 March 2022 4.250% 9.97 120-120
G
 
$31,768,016
 0.000% 
Fixed
 March 2022 4.250% 9.97 120-120
HP(10) 
 
$10,000,000
 
0.000%
 
Fixed(11)
 October 2018 6.486% 6.26 1-79
X-ALA(12) 
$50,454,121
 N/A 
Fixed
 N/A 0.980% N/A N/A
V(13) 
 N/A N/A N/A N/A N/A N/A N/A
R(14) 
 N/A N/A N/A N/A N/A N/A N/A
LR(14) 
 N/A N/A N/A N/A N/A N/A N/A
 

(1)Approximate; subject to a variance of plus or minus 5.0%.
 
(2)
The assumed final distribution date with respect to any class of certificates is the distribution date on which the final distribution would occur for that class of certificates based upon the assumption that no mortgage loan is prepaid prior to its stated maturity date or anticipated repayment date, as applicable, and otherwise based on modeling assumptions described in this prospectus supplement.  The actual performance and experience of the mortgage loans will likely differ from such assumptions.  See “Yield and Maturity Considerations” in this prospectus supplement.
 
(3)For any distribution date, the pass-through rate on the Class B certificates will equal a per annum rate equal to the lesser of (i) the weighted average of the net mortgage rates on the mortgage loans (in the case of the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio, taking into account the interest rate and principal balance of the pooled component only) (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as of their respective due dates in the month preceding the month in which such distribution date occurs and (ii) 4.934%.
 
(4)For any distribution date, the pass-through rates on the Class C and Class D certificates will equal a per annum rate equal to the weighted average of the net mortgage rates on the mortgage loans (in the case of the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio, taking into account the interest rate and principal balance of the pooled component only) (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as of their respective due dates in the month preceding the month in which such distribution date occurs.
 
(5)The credit support for each class of certificates presented in the table does not include the non-pooled component of the mortgage loan (referenced in this prospectus supplement as the Hartman Portfolio mortgage loan) secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio.
 
(6)The weighted average life and principal window during which distributions of principal would be received as set forth in the table with respect to each class of certificates is based on (i) modeling assumptions and prepayment assumptions described in this prospectus supplement, (ii) assumptions that there are no prepayments or losses on the mortgage loans and (iii) assumptions that there are no extensions of maturity dates and that mortgage loans with anticipated repayment dates are repaid on their respective anticipated repayment dates.
 
(7)Represents the approximate credit support for the Class A-1, Class A-2, Class A-3 and Class A-4 certificates, in the aggregate.
 
(8)None of the classes of certificates set forth below in this table are offered by this prospectus supplement.
 
(9)
The Class  X-A and Class X-B certificates will not have certificate balances.  None of the Class X-A or Class X-B certificates are entitled to distributions of principal.  The Class  X-A and Class X-B certificates will accrue interest on their related notional balance and at the related pass-through rate as described in this prospectus supplement under “Description of the Offered Certificates—General” and “—Distributions.”
 
(10)The Class HP certificates will only receive distributions from, and will only incur losses with respect to, the non-pooled component of the Hartman Portfolio mortgage loan.
 
(11)For any distribution date, the pass-through rate on the Class HP certificates will be the net mortgage rate of the non-pooled component of the Hartman Portfolio mortgage loan.
 
(12)
The Class X-ALA certificates will not have a certificate balance or assumed final distribution date.  The Class X-ALA certificates will not be entitled to distributions in respect of principal.  The Class X-ALA certificates will be entitled to distributions of the Alamance Crossing Interest Strip, which strip is equal to the amount of interest accrued on a notional balance equal to the stated principal balance of the Alamance Crossing mortgage loan at a rate equal to the pass-through rate of the Class X-ALA certificates and calculated on the basis of the actual number of days elapsed in each interest accrual period and a 360-day year, as described in this prospectus supplement  under “Description of the Offered Certificates—General” and “—Distributions of the Alamance Crossing Interest Strip.”
 
 
xii

 
 
(13)The Class V certificates will not have a certificate balance, notional balance, pass-through rate or assumed final distribution date.  The Class V certificates represent undivided interests in the excess interest, as further described in this prospectus supplement.  The Class V certificates will not be entitled to distributions in respect of interest other than excess interest.
 
(14)The Class R and Class LR certificates will each not have a certificate balance, notional balance, pass-through rate or assumed final distribution date.  The Class R and Class LR certificates represent the residual interests in each Trust REMIC, as further described in this prospectus supplement.  The Class R and Class LR certificates will not be entitled to distributions of principal or interest.
 
 
xiii

 
 
The following table shows information regarding the mortgage loans and the mortgaged properties as of the cut-off date.  All weighted averages set forth below are based on the principal balances of the mortgage loans as of such date.
 
The Mortgage Pool(1)
 
Outstanding Pool Balance as of the Cut-off Date(2)
$941,268,017
Number of Mortgage Loans
43
Number of Mortgaged Properties
67
Average Cut-off Date Mortgage Loan Balance$21,889,954
Weighted Average Mortgage Rate
5.810%
Weighted Average Cut-off Date Remaining Term to
Maturity (in months) (3)
110
Weighted Average Cut-off Date Debt Service Coverage Ratio1.78x
Weighted Average Cut-off Date Loan-to-Value Ratio59.2%
Cut-off Date U/W NOI Debt Yield
12.8%
 

(1)Statistical information in this table does not include the non-pooled component of the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio.
 
(2)Subject to a permitted variance of plus or minus 5.0%.
 
(3)Calculated with respect to an anticipated repayment date for 1 mortgage loan, representing 1.6% of the outstanding pool balance as of the cut-off date.
 
 
xiv

 
 
    
 SUMMARY 
   
 This summary highlights selected information from this prospectus supplement and does not include all of the relevant information you need to consider in making your investment decision. You are advised to carefully read, and should rely solely on, the detailed information appearing elsewhere in this prospectus supplement and in the accompanying prospectus. 
    
 Title of CertificatesCOMM 2012-LC4 Commercial Mortgage Pass-Through Certificates. 
    
 RELEVANT PARTIES AND DATES 
    
 Issuing Entity
The issuing entity is COMM 2012-LC4 Mortgage Trust, a common law trust fund to be formed on the closing date under the laws of the State of New York pursuant to a pooling and servicing agreement by and among the depositor, the trustee, the certificate administrator, the operating advisor, the master servicer and the special servicer. See “The Issuing Entity” in this prospectus supplement.
 
    
 Depositor
Deutsche Mortgage & Asset Receiving Corporation, a Delaware corporation. Our principal offices are located at 60 Wall Street, New York, New York 10005. Our telephone number is (212) 250-2500. See “The Depositor” in this prospectus supplement and “The Depositor” in the prospectus.
 
    
 Sponsors
German American Capital Corporation, Ladder Capital Finance LLC and Guggenheim Life and Annuity Company each have acted as a sponsor with respect to the issuance of the certificates. The sponsors are the entities that will organize and initiate the issuance of the certificates by transferring or causing the transfer of the mortgage loans to the depositor. The depositor in turn will transfer the mortgage loans to the issuing entity and the issuing entity will issue the certificates. See “The Sponsors, Mortgage Loan Sellers and Originators” in this prospectus supplement and “The Sponsor” in the prospectus.
 
    
 Mortgage Loan SellersGerman American Capital Corporation, a sponsor and an affiliate of Deutsche Bank Securities Inc., an underwriter, and of Deutsche Mortgage & Asset Receiving Corporation, the depositor. 
    
  Ladder Capital Finance LLC, a sponsor and an affiliate of Ladder Capital Securities LLC, an underwriter. 
    
  Guggenheim Life and Annuity Company, a sponsor and an affiliate of Guggenheim Securities, LLC, an underwriter. 
    
  
See “The Sponsors, Mortgage Loan Sellers and Originators” in this prospectus supplement.
 
    
    
    
    
    
    

 
S-1

 
 
  The number and total cut-off date principal balance of the mortgage loans that will be transferred to the depositor by the respective mortgage loan sellers are as follows: 
          
  Mortgage Loan Seller 
Number
of
Mortgage
Loans
 
Total Cut-off
Date Principal
Balance
 
% of Initial
Outstanding
Pool
Balance
 
  
German American Capital Corporation(1)
 13 $418,332,854 44.4% 
  Ladder Capital Finance LLC 23 $393,439,607 41.8% 
  Guggenheim Life and Annuity Company   7 $129,495,555 13.8% 
  Total 43 $941,268,017 100.0% 
           
  (1)Does not include the non-pooled component of the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio. 
     
 OriginatorsExcept as indicated in the following sentences, each mortgage loan seller or one of its affiliates originated each of the mortgage loans as to which it is acting as mortgage loan seller. 
    
  The mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio, representing 6.0% of the outstanding pool balance as of the cut-off date and as to which German American Capital Corporation is acting as mortgage loan seller, is a mortgage loan that was originated by an affiliate of J.P. Morgan Investment Management Inc. and acquired by German American Capital Corporation. 
    
  The mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as Alamance Crossing, representing 5.4% of the outstanding pool balance as of the cut-off date and as to which Guggenheim Life and Annuity Company is acting as mortgage loan seller, was originated by Regions Bank and acquired by Guggenheim Life and Annuity Company. 
    
  
See “The Sponsors, Mortgage Loan Sellers and Originators” in this prospectus supplement.
 
    
 Master Servicer
Wells Fargo Bank, National Association, a national banking association, will act as master servicer with respect to all of the mortgage loans sold to the depositor. See “The Servicers—The Master Servicer” in this prospectus supplement. The master servicer will be primarily responsible for servicing and administering, directly or through sub-servicers or primary servicers, the mortgage loans: (a) as to which there is no default or reasonably foreseeable default that would give rise to a transfer of servicing to the special servicer; and (b) as to which any such default or reasonably foreseeable default has been corrected, including as part of a workout. In addition, the master servicer will be the primary party responsible for making principal and interest advances and property advances under the pooling and servicing agreement with respect to the mortgage loans that it is servicing, subject in each case to a nonrecoverability determination. The fee of the master servicer with respect to the mortgage loans will be
 
 
 
S-2

 
 
  
payable monthly from amounts received in respect of interest on each mortgage loan serviced by the master servicer (prior to application of such interest payments to make payments on the certificates), and will equal a rate per annum equal to the administrative fee rate set forth on Annex A-1 of this prospectus supplement for each mortgage loan (net of the trustee/certificate administrator fee rate and operating advisor fee rate) multiplied by the stated principal balance of the related mortgage loan. The master servicer will also be entitled to receive income from investment of funds in certain accounts and certain fees paid by the borrowers. See “The Servicers—The Master Servicer” and “The Pooling and Servicing Agreement—Servicing Compensation and Payment of Expenses” in this prospectus supplement.
 
    
  The principal west coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at 1901 Harrison Street, Oakland, California 94612. The principal east coast commercial mortgage master servicing offices of Wells Fargo Bank, National Association are located at Duke Energy Center, 550 South Tryon Street, 14th Floor, MAC D1086-120, Charlotte, North Carolina 28202. 
    
 Special Servicer
CWCapital Asset Management LLC, a Massachusetts limited liability company, will be responsible for the servicing and administration of the specially serviced loans and REO properties. See “The Servicers—The Special Servicer” and “The Pooling and Servicing Agreement—Special Servicing” in this prospectus supplement. CWCapital Asset Management LLC was appointed to be the special servicer by CPUSI Co-Investment SS Securities, LLC, which is expected to be the initial directing holder (other than with respect to the mortgage loans that are part of a split loan structure) and, on the closing date, is expected to purchase the Class E, Class F and Class G certificates. The principal servicing office of CWCapital Asset Management LLC is located at 7501 Wisconsin Avenue, Suite 500 West, Bethesda, Maryland 20814, and its telephone number is (202) 715-9500.
 
    
  The principal compensation to be paid to the special servicer in respect of its special servicing activities will be the special servicing fee, the workout fee and the liquidation fee. 
    
  The special servicing fee will equal 0.25% per annum of the stated principal balance of the related specially serviced loan (including the non-pooled component of the Hartman Portfolio mortgage loan) or REO loan (or mortgage loan as to which the related mortgaged property has become an REO property), and will be payable monthly. The special servicing fee for each specially serviced loan will accrue on the same basis as interest accrues on such specially serviced loan. 
    
  The workout fee will generally be payable with respect to each specially serviced loan (including the non-pooled component of the Hartman Portfolio mortgage loan) which has become a “corrected mortgage loan” (which will occur (i) with respect to a specially serviced loan as to which there has been a payment default, when the borrower has brought the mortgage loan current and thereafter made three consecutive full and timely monthly payments, 
 
 
S-3

 
 
  including pursuant to any workout and (ii) with respect to any other specially serviced loan, when the related default is cured or the other circumstances pursuant to which it became a specially serviced loan cease to exist in the good faith judgment of the special servicer). The workout fee will be payable out of each collection of interest and principal (including scheduled payments, prepayments, balloon payments, and payments at maturity) received on the related mortgage loan for so long as it remains a corrected mortgage loan, in an amount equal to the lesser of (1) 1.0% of each such collection of interest and principal and (2) $1,000,000 in the aggregate with respect to any particular workout of a specially serviced loan. 
    
  A liquidation fee will generally be payable with respect to each specially serviced loan (including the non-pooled component of the Hartman Portfolio mortgage loan) as to which the special servicer obtains a full or discounted payoff from the related borrower or which is repurchased by the related mortgage loan seller outside the applicable cure period and, except as otherwise described in this prospectus supplement, with respect to any specially serviced loan or REO property as to which the special servicer receives any liquidation proceeds. The liquidation fee for each specially serviced loan will be payable from the related payment or proceeds in an amount equal to the lesser of (1) 1.0% of such payment or proceeds and (2) $1,000,000. 
    
  
Workout fees and liquidation fees paid by the issuing entity with respect to each mortgage loan will be subject to an aggregate cap per mortgage loan of $1,000,000 as described in “The Pooling and Servicing Agreement—Special Servicing—Special Servicing Compensation” in this prospectus supplement. Any workout fees or liquidation fees paid to a predecessor or successor special servicer will not be taken into account in determining the cap.
 
    
  The special servicer will also be entitled to receive income from investment of funds in certain accounts and certain fees paid by the borrowers. 
    
  
The foregoing compensation to the special servicer will be paid from the applicable distributions on the mortgage loans prior to application of such distributions to make payments on the certificates, and may result in shortfalls in payments to certificateholders. See “The Servicers—The Special Servicer” and “The Pooling and Servicing Agreement—Special Servicing—Special Servicing Compensation” in this prospectus supplement.
 
    
 Trustee
U.S. Bank National Association, a national banking association. The corporate trust offices of U.S. Bank National Association are located at 190 South LaSalle Street, 7th floor, Chicago, Illinois 60603. Following the transfer of the underlying mortgage loans into the issuing entity, the trustee, on behalf of the issuing entity, will become the mortgagee of record with respect to each mortgage loan transferred to the issuing entity. In addition (subject to the terms of the pooling and servicing agreement), the trustee will be primarily responsible for back-up advancing. See “The Trustee” in this prospectus supplement.
 
    
 
 
S-4

 
 
 
Certificate Administrator
and Custodian

Deutsche Bank Trust Company Americas, a New York banking corporation, located at 1761 East St. Andrew Place, Santa Ana, California 92705-4934, Attention: Trust Administration-DB12L4, and its telephone number is (714) 247-6000.
 
    
  
The certificate administrator will be responsible for: (a) distributing payments to certificateholders, (b) delivering or otherwise making available certain reports to certificateholders and (c), in its capacity as 17g-5 information provider, making available certain information to rating agencies in accordance with Rule 17g-5 under the Securities Exchange Act of 1934, as amended. In addition, the certificate administrator will have additional duties with respect to tax administration. See “The Certificate Administrator and Custodian” in this prospectus supplement.
 
    
  The fees of the trustee, custodian and certificate administrator and custodian will be payable monthly from amounts received in respect of interest on each mortgage loan (prior to application of such interest payments to make payments on the certificates), and will be equal to, in the aggregate, 0.002% per annum of the stated principal balance of the related mortgage loan. The certificate administrator will also be entitled to receive income from investment of funds in certain accounts maintained on behalf of the issuing entity. 
    
 Operating AdvisorPark Bridge Lender Services LLC, a New York limited liability company and an affiliate of Park Bridge Financial LLC. 
    
  
With respect to each mortgage loan, at any time during the period when a “Control Termination Event,” as described under “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement, has occurred and is continuing:
 
     
  (i)the special servicer will be required to consult with the operating advisor with regard to certain major decisions with respect to the mortgage loans to the extent described in this prospectus supplement and the pooling and servicing agreement; 
     
  (ii)the operating advisor will be required to review certain operational activities related to specially serviced loans in general on a platform level basis; and 
     
  (iii)based on the operating advisor’s review of certain information described in this prospectus supplement, the operating advisor will be required to prepare an annual report to be provided to the trustee, the rating agencies and the certificate administrator (and made available through the certificate administrator’s website) setting forth its assessment of the special servicer’s performance of its duties under the pooling and servicing agreement on a platform-level basis with respect to the resolution and liquidation of specially serviced loans. 
     
     
     
 
 
S-5

 
 
  
With respect to each mortgage loan, after the occurrence and continuance of a “Consultation Termination Event,” as described under “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement, if the operating advisor determines the special servicer is not performing its duties as required under the pooling and servicing agreement or is otherwise not acting in accordance with the servicing standard, the operating advisor may recommend the replacement of the special servicer as described under “The Servicers—Replacement of the Special Servicer” in this prospectus supplement.
 
    
  The operating advisor is entitled to a fee payable on each distribution date, calculated based on the outstanding principal balance of each mortgage loan (including the principal balance of the non-pooled component of the Hartman Portfolio mortgage loan) in the issuing entity and the operating advisor fee rate of 0.0017% per annum. 
    
  
For additional information regarding the responsibilities of the operating advisor, see “The Pooling and Servicing Agreement—The Operating Advisor,” and “The Operating Advisor” in this prospectus supplement.
 
    
 Significant Obligors
The mortgaged real property identified on Annex A-1 to this prospectus supplement as Square One Mall secures a mortgage loan that represents 10.6% of the outstanding pool balance as of the cut-off date. See “Description of the Mortgage Pool—Significant Mortgage Loans and Significant Obligors” in this prospectus supplement.
 
    
 The Directing Holder
With respect to each mortgage loan, other than the Hartman Portfolio mortgage loan, the directing holder will be the controlling class certificateholder (or a representative thereof) selected by more than 50% of the controlling class certificateholders, by certificate balance, as certified by the certificate registrar from time to time as provided for in the pooling and servicing agreement. With respect to the Hartman Portfolio mortgage loan, the directing holder will be as specified in the definition of “Directing Holder” as set forth in “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement.
 
    
  The controlling class is the most subordinate of the Class E, Class F and Class G certificates then outstanding that has an outstanding certificate balance (as reduced or notionally reduced by any realized losses and any appraisal reduction amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of that class. No other class of certificates will be eligible to act as the controlling class or appoint a directing holder. 
    
  For so long as at least one of the Class E, Class F and Class G certificates has an outstanding certificate balance (as reduced or notionally reduced by any realized losses and any appraisal reduction amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of that class, the directing holder will have certain consent and consultation rights 
    
 
 
S-6

 
 
  under the pooling and servicing agreement under certain circumstances. 
    
  
At any time a “control termination event” has occurred and is continuing (i.e., when (i) no class of the Class E, Class F and Class G certificates has an outstanding certificate balance (as reduced or notionally reduced by any realized losses and any appraisal reduction amounts allocable to such class) that is equal to or greater than 25% of the initial certificate balance of that class or (ii) a control termination event is deemed to occur as described under “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement), the consent rights of the directing holder will terminate, and the directing holder will retain consultation rights under the pooling and servicing agreement under certain circumstances.
 
    
  
At any time a “consultation termination event” has occurred and is continuing (i.e., when (i) no class of the Class E, Class F and Class G certificates has an outstanding certificate balance (as reduced by any realized losses (but without regard to appraisal reduction amounts) allocable to such class) that is equal to or greater than 25% of the initial certificate balance of that class or (ii) a consultation termination event is deemed to occur as described under “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement), all of the rights of the directing holder will terminate. See “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement.
 
    
  It is anticipated that CPUSI Co-Investment SS Securities, LLC will be the initial directing holder with respect to each mortgage loan (other than the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio). 
    
 Underwriters
Deutsche Bank Securities Inc., Ladder Capital Securities LLC, Guggenheim Securities, LLC, Morgan Stanley & Co. LLC and RBS Securities Inc. are the underwriters. Deutsche Bank Securities Inc. is an affiliate of German American Capital Corporation, a sponsor and mortgage loan seller, Deutsche Bank Trust Company Americas, the certificate administrator and 17g-5 information provider, and Deutsche Mortgage & Asset Receiving Corporation, the depositor. Ladder Capital Securities LLC is an affiliate of (i) Ladder Capital Finance LLC, one of the sponsors and mortgage loan sellers, and (ii) the borrower under the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as BJ’s Wholesale Pittsfield, which mortgage loan represents 1.2% of the outstanding pool balance as of the cut-off date. Guggenheim Securities, LLC is an affiliate of Guggenheim Life and Annuity Company, one of the sponsors and mortgage loan sellers. The underwriters are required to purchase the certificates offered in this prospectus supplement from the depositor (in the amounts set forth under the heading “Method of Distribution (Underwriter Conflicts of Interest)” in this prospectus supplement), subject to certain conditions.
 
    
    
    
 
 
S-7

 
 
 Affiliates and Other RelationshipsAll the shares of capital stock of Deutsche Mortgage & Asset Receiving Corporation, which is the depositor, are held by DB U.S. Financial Markets Holding Corporation. 
    
  German American Capital Corporation, a sponsor and mortgage loan seller, Deutsche Bank Securities Inc., an underwriter, Deutsche Bank Trust Company Americas, the certificate administrator, custodian and 17g-5 information provider, and Deutsche Mortgage & Asset Receiving Corporation, the depositor, are affiliates of each other. 
    
  Ladder Capital Finance LLC, which is a sponsor and mortgage loan seller, is an affiliate of Ladder Capital Securities LLC, an underwriter. 
    
  Guggenheim Life and Annuity Company, which is a sponsor and mortgage loan seller, is an affiliate of Guggenheim Securities, LLC, an underwriter. 
    
  Deutsche Bank AG, Cayman Islands Branch (an affiliate of German American Capital Corporation, a sponsor and mortgage loan seller, Deutsche Bank Securities Inc., an underwriter, Deutsche Bank Trust Company Americas, the certificate administrator and 17g-5 information provider, and Deutsche Mortgage & Asset Receiving Corporation, the depositor), Wells Fargo Bank, National Association and certain other third party lenders provide warehouse financing to certain affiliates of Ladder Capital Finance LLC. All of the mortgage loans that Ladder Capital Finance LLC will transfer to the depositor, representing 41.8% of the outstanding pool balance as of the cut-off date, are (or are expected to be prior to the closing date) subject to those repurchase facilities. Proceeds received by Ladder Capital Finance LLC in connection with the contribution of mortgage loans to this securitization transaction will be applied, among other things, to reacquire the financed mortgage loans and make payments to the repurchase agreement counterparties. 
    
  Wells Fargo Bank, National Association is the master servicer. Ladder Capital Finance LLC is a mortgage loan seller and a sponsor. Pursuant to certain interim servicing agreements between Wells Fargo Bank, National Association, on the one hand, and Ladder Capital Finance LLC and certain of its affiliates, on the other hand, Wells Fargo Bank, National Association acts as interim servicer with respect to certain of the mortgage loans owned from time to time by Ladder Capital Finance LLC and those affiliates thereof, including, prior to their inclusion in the issuing entity, 21 of the mortgage loans to be contributed to this securitization by Ladder Capital Finance LLC, representing 40.6% of the outstanding pool balance as of the cut-off date. Pursuant to interim servicing agreements between Wells Fargo Bank, National Association, on the one hand, and German American Capital Corporation and certain of its affiliates, on the other hand, Wells Fargo Bank, National Association acts as interim servicer with respect to certain of the mortgage loans owned from time to time by German American Capital Corporation and those affiliates thereof including, prior to their inclusion in the issuing entity, 4 of the mortgage loans to be contributed to this securitization by 
 
 
S-8

 
 
  German American Capital Corporation, representing 15.2% of the outstanding pool balance as of the cut-off date. 
    
  In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as BJ’s Wholesale Pittsfield, which secures a mortgage loan representing 1.2% of the outstanding pool balance as of the cut-off date, the related mortgage loan seller/originator (Ladder Capital Finance LLC) is an affiliate of the related borrower. 
    
  
These roles and other potential relationships may give rise to conflicts of interest as further described under “Risk Factors—Risks Related to Conflicts of Interest” in this prospectus supplement.
 
    
 SIGNIFICANT DATES, PERIODS AND EVENTS 
    
 Cut-off DateWith respect to each mortgage loan, the later of the related due date of such mortgage loan in March 2012 and the date of origination of each mortgage loan. 
    
 Closing DateOn or about March 20, 2012. 
    
 Distribution DateThe fourth business day following the determination date in each month, commencing in April 2012. The initial distribution date will be April 12, 2012. 
    
 Record DateWith respect to any distribution date, the close of business on the last business day of the preceding month. 
    
 Determination DateThe sixth day of each month, or if such sixth day is not a business day, the following business day, commencing in April 2012. 
    
 Collection PeriodWith respect to any distribution date, the period that begins immediately following the determination date in the calendar month preceding the month in which that distribution date occurs (or, in the case of the initial distribution date, immediately following the cut-off date) and ends on the determination date in the calendar month in which that distribution date occurs. 
    
 Interest Accrual PeriodWith respect to any distribution date and each class of certificates (other than the Class X-ALA, Class V, Class LR and Class R certificates), the calendar month immediately preceding the month in which the distribution date occurs. Calculations of interest due in respect of each class of certificates (other than the Class X-ALA, Class V, Class LR and Class R certificates) will be made on the basis of a 360-day year consisting of twelve 30-day months. Calculations of interest due in respect of the Class X-ALA certificates will be made on the basis of the actual number of days elapsed in each interest accrual period and a 360-day year. 
    
    
    
    
    
    
    
    
 
 
S-9

 
 
 CERTIFICATES OFFERED 
    
 GeneralThe depositor is offering hereby the following 7 classes of COMM 2012-LC4 Commercial Mortgage Pass-Through Certificates: 
     
  Class A-1 
     
  Class A-2 
     
  Class A-3 
     
  Class A-4 
     
  Class A-M 
     
  Class B 
     
  Class C 
    
  The trust to be created by the depositor will consist of a total of 18 classes, the following 11 of which are not being offered through this prospectus supplement and the accompanying prospectus: Class X-A, Class X-B, Class D, Class E, Class F, Class G, Class HP, Class X-ALA, Class V, Class R and Class LR. 
    
  The certificates will represent beneficial ownership interests in the issuing entity. The issuing entity’s assets will primarily consist of 43 fixed-rate mortgage loans. The mortgage loans are secured by first liens on 67 commercial, multifamily and manufactured housing community properties. 
    
  The mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio will be divided into a pooled component having a cut-off date balance of $56,514,846 and a non-pooled component having a cut-off date balance of $10,000,000. The pooled component of the Hartman Portfolio mortgage loan will be pooled together with the other mortgage loans and interest and principal received in respect of the pooled component of the Hartman Portfolio mortgage loan will be available to make distributions in respect of each class of certificates other than the Class HP certificates. Payments of interest and principal received in respect of the non-pooled component of the Hartman Portfolio mortgage loan will be available to make distributions in respect of the Class HP certificates. Losses with respect to the Hartman Portfolio mortgage loan will be allocated first to the non-pooled component and then to the pooled component. Losses with respect to the other mortgage loans will not be allocated to the non-pooled component of the Hartman Portfolio mortgage loan. 
    
  Although the non-pooled component of the Hartman Portfolio mortgage loan is an asset of the issuing entity, unless otherwise indicated, for purposes of numerical and statistical information contained in this prospectus supplement, the non-pooled component of the Hartman Portfolio mortgage loan is not reflected in this prospectus supplement and the term “mortgage loan” in that context does not include the non-pooled component of the Hartman Portfolio mortgage loan. 
    
    
 
 
S-10

 
 
        
 Certificate BalancesThe offered certificates have the approximate initial certificate balances set forth below, subject to a permitted variance of plus or minus 5.0%. 
      
  Class A-1$48,958,000  
  Class A-2$77,841,000  
  Class A-3$115,586,000  
  Class A-4$416,502,000  
  Class A-M$92,950,000  
  Class B$44,711,000  
  Class C$32,944,000  
    
  
The certificates that are not offered in this prospectus supplement (other than the Class V, Class R and Class LR certificates) will have the initial aggregate certificate balance or notional balance, as applicable, as set forth under “Executive Summary—Certificates” in this prospectus supplement.
 
    
  The Class X-A and Class X-B certificates will not have a principal balance or entitle their holders to distributions of principal. The Class X-A and Class X-B certificates will represent the right to receive distributions of interest accrued as described in this prospectus supplement on a notional balance. 
    
  The notional balance of the Class X-A certificates will equal the aggregate certificate balance of each of the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-M certificates outstanding from time to time. The total initial notional balance of the Class X-A certificates will be approximately $751,837,000. 
    
  The notional balance of the Class X-B certificates will equal the aggregate certificate balance of each of the Class B, Class C, Class D, Class E, Class F and Class G certificates outstanding from time to time. The total initial notional balance of the Class X-B certificates will be approximately $189,431,016. 
    
 Pass-Through RatesEach class of the certificates (other than the Class V, Class R and Class LR certificates) will accrue interest at an annual rate called a pass-through rate which (other than for the Class HP certificates) is set forth or otherwise described below: 
    
  The pass-through rates applicable to the Class A-1, Class A-2, Class A-3, Class A-4, Class A-M, Class E, Class F and Class G certificates will be fixed at 1.156%, 2.256%, 3.069%, 3.288%, 4.063%, 4.250%, 4.250% and 4.250%, respectively.  The pass-through rate applicable to the Class B certificates will, at all times equal the lesser of (i) the weighted average of the net interest rates on the mortgage loans (in the case of the Hartman Portfolio mortgage loan, taking into account the interest rate and principal balance of the pooled component only) (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as of their respective due dates in the month preceding the month in which the related distribution date occurs and (ii) 4.934%.  The pass-through rates applicable to the Class C and Class D certificates will, at all times, equal the weighted average of the 
     
     
 
 
S-11

 
 
   net interest rates on the mortgage loans (in the case of the Hartman Portfolio mortgage loan, taking into account the interest rate and principal balance of the pooled component only) (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) as of their respective due dates in the month preceding the month in which the related distribution date occurs. 
     
  The pass-through rate for the initial distribution date applicable to the (i) Class X-A certificates will equal approximately 2.720% per annum and (ii) Class X-B certificates will equal approximately 0.699% per annum. 
     
  The pass-through rate for the Class X-A certificates for any distribution date will equal the weighted average of the respective strip rates, which we refer to as Class X-A strip rates, at which interest accrues from time to time on the respective components of the notional balance of the Class X-A certificates outstanding immediately prior to the related distribution date, with the relevant weighting to be done based upon the relative sizes of those components. Each of those components will have a component notional balance that corresponds to the certificate balance of the Class A-1, Class A-2, Class A-3, Class A-4 or Class A-M certificates, respectively. For purposes of the accrual of interest on the Class X-A certificates for each distribution date, the applicable Class X-A strip rate with respect to each such component for each such interest accrual period will equal the excess, if any, of (a) the weighted average net mortgage rate (or in the case of the Hartman Portfolio mortgage loan, taking into account the interest rate and principal balance of the pooled component only) for such interest accrual period (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months), over (b) the pass-through rate in effect during such interest accrual period for the class of certificates corresponding to such component. 
     
  
For a more detailed discussion of the Class X-A strip rates and the pass-through rate applicable to the Class X-A certificates, see “Description of the Offered Certificates—Distributions” in this prospectus supplement.
 
     
  The pass-through rate for the Class X-B certificates for any distribution date will equal the weighted average of the respective strip rates, which we refer to as Class X-B strip rates, at which interest accrues from time to time on the respective components of the notional balance of the Class X-B certificates outstanding immediately prior to the related distribution date, with the relevant weighting to be done based upon the relative sizes of those components. Each of those components will have a component notional balance that corresponds to the certificate balance of the Class B, Class C, Class D, Class E, Class F or Class G certificates, respectively. For purposes of the accrual of interest on the Class X-B certificates for each distribution date, the applicable Class X-B strip rate with respect to each such component for each such 
   
 
 
 
 
 
S-12

 
 
   interest accrual period will equal the excess, if any, of (a) the weighted average net mortgage rate (or in the case of the Hartman Portfolio mortgage loan, taking into account the interest rate and principal balance of the pooled component only) for such interest accrual period (in each case, adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months), over (b) the pass-through rate in effect during such interest accrual period for the class of certificates corresponding to such component. 
     
  
For a more detailed discussion of the Class X-B strip rates and the pass-through rate applicable to the Class X-B certificates, see “Description of the Offered Certificates—Distributions” in this prospectus supplement.
 
     
  The Class X-ALA certificates will be entitled to distributions of the Alamance Crossing Interest Strip, which accrues on the stated principal balance of the Alamance Crossing mortgage loan at a fixed pass-through rate equal to 0.980% per annum during the related interest accrual period, which will be computed on the same accrual basis as interest accrues on the related mortgage loan.  See “Description of the Offered Certificates—General” and “—Distributions” in this prospectus supplement. 
     
  
The Class V, Class R and Class LR certificates will not have pass-through rates. See “Description of the Offered Certificates—Distributions—Method, Timing and Amount” and “—Payment Priorities” in this prospectus supplement.
 
     
  
See “Description of the Offered Certificates—Distributions” in this prospectus supplement.
 
     
 
Assumed Final Distribution
Date
 
The assumed final distribution dates of the offered certificates are set forth below. Such dates were calculated based on numerous assumptions as described in this prospectus supplement under “Description of the Offered Certificates—Distributions—Assumed Final Distribution Date.” Accordingly, if those assumptions prove to be inaccurate, the actual final distribution date for one or more classes of the offered certificates may be earlier or later, and could be substantially earlier or later, than the related assumed final distribution date(s).
 
     
 Class 
Assumed Final
Distribution Date
 
 Class A-1 July 2016 
 Class A-2 March 2017 
 Class A-3 July 2021 
 Class A-4 January 2022 
 Class A-M February 2022 
 Class B February 2022 
 Class C February 2022 
      
 DistributionsOn each distribution date, you will be entitled to receive interest and principal distributions in respect each class of certificates, other than the Class X-ALA, Class V, Class LR, Class R and 
 
 
S-13

 
 
    
  Class HP certificates, from available funds (excluding any amounts attributable to the non-pooled component of the Hartman Portfolio mortgage loan) in an amount equal to your certificate’s interest and principal entitlement, subject to: 
      
  (i) payment of the respective interest entitlement for any class of certificates bearing an earlier alphabetical designation, except in respect of the distribution of interest among the Class A-1, Class A-2, Class A-3, Class A-4, Class X-A and Class X-B certificates, which will have the same senior priority, and 
      
  (ii) 
if applicable, payment of the respective principal entitlement for such distribution date to outstanding classes of certificates having an earlier alphanumeric designation.
 
      
  The Class HP certificates will only be entitled to distributions from amounts collected on the non-pooled component of the Hartman Portfolio mortgage loan. 
      
  
A description of the principal and interest entitlement of each class of certificates offered in this prospectus supplement for each distribution date can be found in “Description of the Offered Certificates—Distributions—Method, Timing and Amount,” “—Payment Priorities” and “—Distribution of Available Funds” in this prospectus supplement.
 
      
  The Class X-ALA certificates will only be entitled to distributions of the Alamance Crossing Interest Strip as described in this prospectus supplement under “Description of the Offered Certificates—General” and “—Distributions” in this prospectus supplement. 
    
  The Class V certificates will not be entitled to distributions of interest or principal other than excess interest. Neither of the Class X-A nor Class X-B certificates will be entitled to any distributions of principal. 
      
  The Class LR and Class R certificates will not be entitled to distributions of interest or principal. 
      
 
Prepayment Premiums;
Yield Maintenance Charges
 
Prepayment premiums and yield maintenance charges will be allocated as described in “Description of the Offered Certificates—Prepayment Premiums and Yield Maintenance Charges” in this prospectus supplement.
 
      
 
Prepayment and Yield
Considerations
 
The yield to investors will be sensitive to the timing of prepayments, repurchases or purchases of mortgage loans and the magnitude of losses on the mortgage loans due to liquidations. The yield to maturity on each class of certificates offered in this prospectus supplement will be sensitive to the rate and timing of principal payments (including both voluntary and involuntary prepayments, defaults and liquidations) on the mortgage loans and payments with respect to repurchases thereof that are applied in
 
 
 
S-14

 
 
  reduction of the certificate balance of that class. See “Risk Factors—Risks Related to the Offered Certificates,” “—Risks Related to Prepayments and Repurchases of Mortgage Loans” and “—Yield Considerations” and “Yield and Maturity Considerations” in this prospectus supplement and “Yield and Maturity Considerations” in the prospectus. 
      
 
Subordination; Allocation of
Losses and Certain Expenses
 
The chart below illustrates the manner in which the rights of various classes (other than the Class X-ALA certificates, the Class V certificates, the Class HP certificates, the Class R certificates and the Class LR certificates) will be senior to the rights of other classes. This subordination will be effected in two ways: other than with respect to the non-pooled component of the Hartman Portfolio mortgage loan, (i) entitlement to receive principal and interest on any distribution date is in descending order and (ii) mortgage loan losses are allocated in ascending order. However, no principal payments or principal losses will be allocated to the Class X-A or Class X-B certificates, although mortgage loan losses that reduce the certificate balance of a class of certificates comprising a component of the notional balance of any of the Class X-A or Class X-B certificates will reduce the notional balances of the Class X-A or Class X-B certificates and, therefore, the amount of interest those classes accrue.
 
      
  (flow chart)  
       
      
   (1)The Class X-A and Class X-B certificates are interest-only certificates. 
      
  No other form of credit enhancement will be available for the benefit of the holders of the certificates offered in this prospectus supplement. 
    
  The Class X-ALA certificates will be entitled to distributions of the Alamance Crossing Interest Strip.  Amounts collected in respect of the Alamance Crossing mortgage loan will be allocated to the Alamance Crossing Interest Strip prior to being allocated to available funds for distribution in respect of the other classes of certificates.  See “Description of the Offered CertificatesGeneral” and “—Distributions.” 
      
  In certain circumstances, shortfalls in mortgage loan interest that are the result of the timing of prepayments and that are in excess of the sum of (x) all or a portion of the servicing fee payable to the 
 
 
S-15

 
 
  master servicer and (y) the amount of mortgage loan interest (other than in respect of the non-pooled component of the Hartman Portfolio mortgage loan and exclusive of excess interest and the Alamance Crossing Interest Strip) that accrues and is collected with respect to any principal prepayment that is made after the date on which interest is due will be allocated to, and be deemed distributed to, each class of certificates (other than the Class X-ALA, Class HP, Class V, Class R and Class LR certificates), pro rata, based upon amounts distributable in respect of interest to each class.  See “Description of the Offered Certificates—Distributions—Prepayment Interest Shortfalls” in this prospectus supplement. 
      
 
Shortfalls in Mortgage
Pool Available Funds
 
The following types of shortfalls in available funds will be allocated in the same manner as mortgage loan losses:
 
      
  shortfalls resulting from additional servicing compensation which the master servicer or the special servicer is entitled to receive; 
     
  shortfalls resulting from interest on advances made by the master servicer, the special servicer or the trustee (to the extent not covered by default interest and late payment fees paid by the related borrower or other borrowers that are not paid to the master servicer or the special servicer as compensation); 
     
   shortfalls resulting from unanticipated expenses of the issuing entity (including, but not limited to, expenses relating to environmental assessments, appraisals, any administrative or judicial proceeding, management of REO properties, maintenance of insurance policies, and permissible indemnification); and 
      
   shortfalls resulting from a reduction of a mortgage loan’s interest rate by a bankruptcy court or from other unanticipated or default-related expenses of the issuing entity. 
      
 Advances   
      
 A.General
The master servicer is required to advance delinquent monthly payments on a mortgage loan (excluding payments with respect to the non-pooled component of the Hartman Portfolio mortgage loan) (if the master servicer determines that the advance (and interest on that advance) will be recoverable from proceeds of the related mortgage loan. A principal and interest advance will generally equal the delinquent portion of the monthly payment (other than a final “balloon” payment that may be due at the related maturity). The master servicer will not be required to advance interest in excess of a mortgage loan’s regular interest rate (i.e., not including any default rate or any excess interest accruing on an anticipated repayment date loan). The master servicer is also not required to advance, among other things, prepayment premiums or yield maintenance charges, or balloon payments. If an advance is made, the master servicer will defer (rather than advance) its servicing fees, but will advance the trustee/certificate
 
 
 
S-16

 
 
   administrator’s fees and the operating advisor’s fees. Neither the master servicer nor the trustee will make an advance if the special servicer determines that such advance is not recoverable from proceeds of the related mortgage loan. 
      
   
If a borrower fails to pay amounts due on the maturity date of the related mortgage loan, the master servicer will be required, on and after such date and until final liquidation of that mortgage loan, to advance only an amount equal to the interest (at the mortgage loan’s regular interest rate, as described above) and principal portion of the monthly payment due immediately prior to the maturity date, as may be reduced by applicable appraisal reduction events as described in this prospectus supplement, subject to a recoverability determination. The master servicer will also be obligated (subject to the limitations described in this prospectus supplement) to make advances to pay delinquent real estate taxes, assessments and hazard insurance premiums and to cover other similar costs and expenses necessary to preserve the priority of the related mortgage, enforce the terms of any mortgage loan or to protect, manage and maintain each related mortgaged property. The master servicer will also be required to make property advances with respect to the portfolio of mortgaged properties securing the Hartman Portfolio mortgage loan (which includes one non-pooled component not included in the mortgage pool). (For the avoidance of doubt, the master servicer will be required to make such property advances with respect to the non-pooled component of the Hartman Portfolio mortgage loan.) The master servicer will not be required to make an advance to the extent that it has received written notice that the special servicer determines that such advance would not be ultimately recoverable from collections on the related mortgage loan.
 
     
   If the master servicer fails to make any required advance, the trustee will be required to make the advance. The obligation of the master servicer and the trustee to make an advance will also be subject to a determination of non-recoverability. The trustee will be entitled to conclusively rely on the determination of non-recoverability made by the master servicer or the special servicer. 
     
   Principal and interest advances are intended to maintain a regular flow of scheduled interest and principal payments to the certificateholders and are not intended to guarantee or insure against losses. Generally, advances that cannot be reimbursed out of collections on, or in respect of, the related mortgage loans will be reimbursed directly from any other collections on the mortgage loans as provided in this prospectus supplement and thus will cause losses to be borne by certificateholders in the priority specified in this prospectus supplement. Nonrecoverable advances made in respect of a mortgage loan other than the Hartman Portfolio mortgage loan may not be reimbursed directly from any collections on the Hartman Portfolio mortgage loan allocable to the non-pooled component of the Hartman Portfolio mortgage loan. The master servicer and the trustee will be entitled to interest on any advances made. This interest will accrue at the rate and is payable under the circumstances described in this 
 
 
S-17

 
 
   prospectus supplement. Interest accrued on outstanding advances may result in reductions in amounts otherwise available for payment on the certificates. 
     
   The Class X-ALA certificates will not be entitled to the benefit of interest advances. 
     
   
See “The Pooling and Servicing Agreement—Advances” in this prospectus supplement.
 
     
 B.Appraisal Reduction Event
Certain adverse events affecting a mortgage loan, called appraisal reduction events, will require the special servicer to obtain a new appraisal (or, with respect to mortgage loans having a principal balance under $2,000,000, at the special servicer’s option, an estimate of value prepared by the special servicer or an appraisal of the related mortgaged property). Based on the appraised value in such appraisal, it may be necessary to calculate an appraisal reduction amount. The amount of interest required to be advanced in respect of a mortgage loan that has been subject to an appraisal reduction event will equal the product of (a) the amount that would be required to be advanced without giving effect to such appraisal reduction event and (b) a fraction, the numerator of which is the stated principal balance of the mortgage loan less any appraisal reduction amounts allocable to such mortgage loan and the denominator of which is the stated principal balance. Due to the payment priorities described above, this will reduce the funds available to pay interest on the most subordinate class or classes of certificates then outstanding.
 
 
 THE MORTGAGE POOL 
      
 Characteristics of the Mortgage Pool 
      
 A.GeneralFor a more complete description of the mortgage loans, see the following sections in this prospectus supplement: 
      
   Description of the Mortgage Pool; 
      
   Annex A-1 (Certain Characteristics of the Mortgage Loans); 
      
   Annex A-2 (Certain Pool Characteristics of the Mortgage Loans and Mortgaged Properties); and 
      
   Annex B (Description of the Top 20 Mortgage Loans or Groups of Cross-Collateralized Mortgage Loans). 
      
   
All numerical information provided in this prospectus supplement with respect to the mortgage loans is approximate. All weighted average information regarding the mortgage loans reflects weighting of the mortgage loans by their respective principal balances as of the cut-off date. For purposes of calculating the respective outstanding principal balances of the mortgage loans as of the cut-off date, it was assumed that all scheduled payments of principal due with respect to the mortgage loans on the cut-off date are timely made.
 
 
 
 
 
S-18

 
 
   When information with respect to mortgaged properties is presented as of the cut-off date and is expressed as a percentage of the initial outstanding pool balance, the percentages are based upon the outstanding principal balance as of the cut-off date of the related mortgage loan or allocated asset amount attributed to such mortgaged property. 
      
   The assets of the issuing entity also include the non-pooled component of the Hartman Portfolio mortgage loan.  Although the non-pooled component of the Hartman Portfolio mortgage loan is an asset of the issuing entity, unless otherwise indicated, for the purpose of numerical and statistical information contained in this prospectus supplement, the non-pooled component of the Hartman Portfolio mortgage loan is not reflected in this prospectus supplement and the term “mortgage loan” in that context does not include the non-pooled component of the Hartman Portfolio mortgage loan unless otherwise indicated.  The non-pooled component of the Hartman Portfolio mortgage loan supports only the Class HP certificates.  Information in the tables in this prospectus supplement excludes the non-pooled component of the Hartman Portfolio mortgage loan unless otherwise stated. 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S-19

 
 
  The information in the following chart is presented as of the cut-off date, unless otherwise indicated. The information contained in the footnotes to the chart below is applicable throughout this prospectus supplement, unless otherwise indicated. 
        
      
All Mortgage
Loans
 
  Number of Mortgage Loans 43 
  Number of Mortgaged Properties 67 
  
Number of Balloon Mortgage Loans(1)
 39 
  Number of Interest-Only Mortgage Loans 3 
  
Number of Partial Interest-Only Mortgage Loans(2)
 1 
  Aggregate Principal Balance $941,268,017 
  Range of Mortgage Loan Principal Balances   
  Minimum Mortgage Loan Balance $4,049,455 
  Maximum Mortgage Loan Balance $99,779,556 
  Average Mortgage Loan Principal Balance $21,889,954 
  Range of Mortgage Rates   
  Minimum Mortgage Rate 4.880% 
  Maximum Mortgage Rate 6.750% 
  Weighted Average Mortgage Rate 5.810% 
  
Range of Remaining Terms to Maturity(3)
   
  
Minimum Remaining Term(3)
 52 months 
  
Maximum Remaining Term(3)
 120 months 
  Weighted Average Remaining Terms to Maturity 110 months 
  
Range of Remaining Amortization Terms(4)
   
  
Minimum Remaining Amortization Term(4)
 294 months 
  
Maximum Remaining Amortization Term(4)
 360 months 
  
Weighted Average Remaining Amortization Term(4)
 352 months 
  
Range of Remaining Amortization Terms(4)
   
  
Range of Cut-off Date Loan-to-Value Ratios(5)
   
  
Minimum Cut-off Date Loan-to-Value Ratio(5)
 24.2% 
  
Maximum Cut-off Date Loan-to-Value Ratio(5)
 74.8% 
  
Weighted Average Loan-to-Value Ratio(5)
 59.2% 
  
Range of U/W NCF Debt Service Coverage Ratios(5)(6)
   
  
Minimum U/W NCF Debt Service Coverage Ratio(5)(6)
 1.22x 
  
Maximum U/W NCF Debt Service Coverage Ratio(5)(6)
 4.12x 
  
Weighted Average U/W NCF Debt Service Coverage Ratio(5)(6)
 1.78x 
  
Range of U/W NOI Debt Yields(5)
   
  
Minimum U/W NOI Debt Yield(5)
 9.3% 
  
Maximum U/W NOI Debt Yield(5)
 21.5% 
  
Weighted Average U/W NOI Debt Yield(5)
 12.8% 
       
  (1)Does not include interest-only mortgage loans or partial interest-only mortgage loans. Includes 1 anticipated repayment date mortgage loan, representing 1.6% of the outstanding pool balance as of the cut-off date. 
        
  (2)One (1) mortgage loan, representing 3.6% of the outstanding pool balance as of the cut-off date, has a partial interest-only period. The interest-only period for this mortgage loan is 24 months following the cut-off date. 
        
  (3)Calculated with respect to an anticipated repayment date for 1 mortgage loan, representing 1.6% of the outstanding pool balance as of the cut-off date. 
        
  (4)Excludes 3 mortgage loans, each of which pay interest-only until their respective maturity date or anticipated repayment date, as applicable. 
        
  (5)For the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio, the loan-to-value ratios, debt service coverage ratios and debt yields have been calculated based on the pooled component only. 
        
  (6)Annual debt service, monthly debt service and the debt service coverage ratios are calculated using the average of the principal and interest payments for the first twelve payment periods of the mortgage loan following cut-off date (but without regard to any leap year adjustments), provided that (i) in the case of a mortgage loan that provides for interest-only payments through maturity (or its anticipated repayment date), such items are calculated based on the interest payments scheduled to be due on the due date following the cut-off date and the 11 due dates thereafter for such mortgage loan, and (ii) in the case of a mortgage loan that provides for an initial interest-only period that ends prior to maturity or the anticipated repayment date, as applicable, and provides for scheduled amortization payments thereafter, such items are calculated based on the monthly payment of principal and interest payable immediately following the expiration of the interest-only period). 
        
 
 
S-20

 
 
 B.Split Loan StructuresThe mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Hartman Portfolio will be divided into a pooled component having a cut-off date balance of $56,514,846 and a non-pooled component having a cut-off date balance of $10,000,000. The pooled component will be senior to the non-pooled component in right of payment of interest and principal, as applicable, received in respect of the Hartman Portfolio mortgage loan. 
           
   The components of the Hartman Portfolio mortgage loan are as set forth below. 
           
    
Hartman Portfolio
Components
 
Cut-Off Date
Principal Amount or
Notional Balance
 
Component
Interest Rate
  
    HP Pooled Component $56,514,846 6.500%  
    HP Non-Pooled Component $10,000,000 6.500%  
           
   The pooled component of the Hartman Portfolio mortgage loan will be pooled together with the other mortgage loans and interest and principal received in respect of the pooled component of the Hartman Portfolio mortgage loan will be available to make distributions in respect of each class of certificates other than the Class HP certificates. Payments of interest and principal, as applicable, received in respect of the non-pooled component of the Hartman Portfolio mortgage loan will be available to make distributions in respect of the Class HP certificates. 
           
   Although the non-pooled component of the Hartman Portfolio mortgage loan is an asset of the issuing entity, unless otherwise indicated, for purposes of numerical and statistical information contained in this prospectus supplement, the non-pooled component of the Hartman Portfolio mortgage loan is not reflected in this prospectus supplement and the term “mortgage loan” in that context does not include the non-pooled component of the Hartman Portfolio mortgage loan. 
           
   
The holder of the Class HP certificates has certain rights with respect to the Hartman Portfolio mortgage loan as described under “Description of the Mortgage Pool—Split Loan Structures—The Pooled Component and the Non-Pooled Component of the Hartman Portfolio Mortgage Loan” in this prospectus supplement. The pooling and servicing agreement will govern the servicing of the Hartman Portfolio mortgage loan. For additional information regarding the Hartman Portfolio mortgage loan, see “Description of the Mortgage Pool—Split Loan Structures—The Pooled Component and the Non-Pooled Component of the Hartman Portfolio Mortgage Loan” in this prospectus supplement.
 
    
 
 
 
 
 
 
      
 
 
S-21

 
 
 C.ARD LoanThe mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as BB&T Headquarters Building provides that if the subject mortgage loan is not paid in full as of a specified date, referred to herein as an “anticipated repayment date,” then (i) the non-default rate at which interest accrues will increase, (ii) payment of the additional interest that accrues as a result of such increase in interest rate, together with compound interest thereon (to the extent permitted by applicable law), will be deferred until the principal balance of the subject mortgage loan is paid in full, and (iii) all excess cash flow generated by the related mortgaged property each month that remains after the payment of scheduled debt service and escrows and property expenses will be applied to pay down principal of the subject mortgage loan. Failure to pay the principal amount of such mortgage loan on its anticipated repayment date will not constitute an event of default. 
              
 D.Security for the Mortgage LoansAll of the mortgage loans will consist of mortgage loans secured by first liens on mortgaged properties. 
              
 E.NonrecourseSubstantially all of the mortgage loans are or should be considered nonrecourse obligations. No mortgage loan will be insured or guaranteed by any governmental entity or private insurer, or by any other person. 
     
 F.Fee Simple/Leasehold EstateEach mortgage loan is secured by, among other things, a first mortgage lien on the fee simple estate in an income-producing real property, a fee simple estate in the land beneath an income producing property, or, in the case of certain mortgaged properties, either (a) a leasehold estate in a portion of the mortgaged property and a fee estate in a portion of the mortgaged property or (b) a leasehold (or subleasehold) estate in the mortgaged property and no mortgage on the related fee estate, as set forth below. 
              
   Interest of Borrower Encumbered 
Number of
Mortgaged
Properties
 
% of Initial
Outstanding Pool
Balance(1)
  
   
Fee Simple Estate(2)
 64  81.6%  
   Partial Fee/Leasehold Estate 2  10.4%  
   Leasehold Estate 1  8.0%  
   Total 67  100.0%  
              
      
   (1)Because this table presents information relating to the mortgaged properties and not the mortgage loans, the information for any mortgaged property that relates to a mortgage loan secured by more than one mortgaged property is based on allocated loan amounts (which amounts, if not specified in the related mortgage loan documents, are based on the appraised values and/or square footage of each mortgaged property and/or each mortgaged property’s underwritten net cash flow). 
              
   (2)May include mortgaged properties constituting the borrower’s leasehold interest in the mortgaged property along with the corresponding fee interest of the ground lessor in such mortgaged property. 
   
 
 
 
 
 
 
 
 
 
 
 
          
 
 
S-22

 
 
 G.Property PurposeThe number of mortgaged properties, and the aggregate cut-off date balance and approximate percentage of the initial outstanding pool balance of the mortgage loans secured thereby, for each indicated purpose are: 
                
   Property Type 
Number of
Mortgaged
Properties
 
Aggregate
Cut-off Date
Balance(1)
 
% of Initial
Outstanding
Pool
Balance(1)
 
   Retail 21  $496,595,028  52.8% 
   
Anchored(2)
 18  479,495,688  50.9% 
   Unanchored 3  17,099,340  1.8% 
   Office 16  143,008,710  15.2% 
   Suburban 13  65,312,416  6.9% 
   Data Center 1  54,888,798  5.8% 
   CBD 2  22,807,496  2.4% 
   Multifamily 11  109,074,771  11.6% 
   Manufactured Housing Community 8  73,170,195  7.8% 
   Hospitality 5  49,419,862  5.3% 
   Mixed Use 2  34,700,000  3.7% 
   Office/Retail 
2
  34,700,000  3.7% 
   Industrial 3  21,747,925  2.3% 
   
Other(3)
 1  13,551,525  1.4% 
   Total/Weighted Average 67  $941,268,017  100.0% 
                
      
   (1)Because this table presents information relating to the mortgaged properties and not the mortgage loans, the information for any mortgaged property that relates to a mortgage loan secured by more than one mortgaged property is based on allocated loan amounts (which amounts, if not specified in the related mortgage loan documents, are based on the appraised value and/or square footage of each mortgaged property and/or each mortgaged property’s underwritten net cash flow). 
                
   (2)Includes single tenant properties. 
                
   (3)Includes 1 mortgaged property as to which the collateral consists of the borrower’s fee interest in the land (but not the improvements), and the borrower has 100% ground leased the property to a ground lessee that directly or indirectly operates the property as a retail property. 
                
 H.Property LocationsThe mortgaged properties are located in 17 separate states and Puerto Rico. The table below shows the number of mortgaged properties, the aggregate principal balance of the related mortgage loans, and the percentage of initial outstanding pool balance secured by mortgaged properties that are located in the top jurisdictions that have concentrations of mortgaged properties of 5.0% or more (based on allocated loan amount as a percentage of the initial outstanding pool balance) as of the cut-off date: 
                
   State/Location 
Number of
Mortgaged
Properties
 
Aggregate Cut-off
Date Balance
 
% of Initial
Outstanding
Pool
Balance
 
   California 6  $125,262,187  13.3% 
   Massachusetts 2  $110,779,556  11.8% 
   Texas 17  $106,226,989  11.3% 
   New York 4  $105,145,654  11.2% 
   Pennsylvania 3  $74,947,427  8.0% 
   North Carolina 2  $65,783,085  7.0% 
   Puerto Rico 4  $57,750,000  6.1% 
   Indiana 7  $57,249,147  6.1% 
   Florida 5  $56,999,272  6.1% 
   Georgia 1  $54,888,798  5.8% 
                
   Because the foregoing table presents information relating to the mortgaged properties and not the mortgage loans, the information for any mortgaged property that relates to a mortgage loan secured by more than one mortgaged property is based on allocated loan amounts (which amounts, if not specified in the 
                
 
 
S-23

 
 
   related mortgage loan documents, are based on the appraised value and/or square footage of each mortgaged property and/or each mortgaged property’s underwritten net cash flow). 
           
   
See “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this prospectus supplement.
 
           
 I.Due DatesMonthly payments of principal and/or interest on each mortgage loan are due as shown below with the indicated grace periods. 
           
   Due Date 
Default Grace
Period Days
 
Number of
Mortgage
Loans
 
% of Initial
Outstanding
Pool Balance
 
   
1st
 5 3 12.1% 
   
6th
 0 40 87.9% 
           
   As used in this prospectus supplement, “grace period” is the number of days before a payment default is an event of default under each mortgage loan. The information in the table above is based on the related loan documents. Certain jurisdictions may impose a statutorily longer grace period. See Annex A-1 to this prospectus supplement for information on the number of days before a payment default is an event of default under each mortgage loan. 
           
 J.Amortization TypesThe mortgage loans have the amortization characteristics set forth in the following table: 
                 
   Type of Amortization 
Number
of
Mortgage
Loans
 
Aggregate
Cut-off Date
Balance
 
% of Initial
Outstanding
Pool
Balance
 
   
Balloon(1)
 38  $792,887,528  84.2% 
   Interest-Only 3  $99,551,525  10.6% 
   
Partial Interest-Only(2)
 1  $33,500,000  3.6% 
   Balloon, Anticipated Repayment Date 1  $15,328,964  1.6% 
   Total 43  $941,268,017  100.0% 
                 
      
   (1)Does not include mortgage loans that are interest-only through the related maturity date, partial interest-only mortgage loans or the mortgage loan with an anticipated repayment date. 
                 
   (2)Includes 1 mortgage loan that pays interest-only for the first 24 scheduled payments after the cut-off date and thereafter provides for regularly scheduled payments of interest and principal based on an amortization period longer than the remaining term of such mortgage loan. Such mortgage loan therefore has an expected balloon balance at the maturity date. 
                 
 K.
Modified and
Refinanced Loans
 
As of the cut-off date, none of the mortgage loans have been modified due to previous delinquencies or impending delinquencies.
 
                 
   In the case of 4 mortgage loans identified on Annex A-1 to this prospectus supplement as Rio Apartments, Treetop Apartments, Susquehanna Valley Mall and Wood Forest Apartments, collectively representing 7.3% of the initial outstanding pool balance, the related mortgage loans are refinancings of other mortgage loans that were previously delinquent and beyond their respective maturity dates. 
                 
   In the case of the mortgage loan identified on Annex A-1 to this prospectus supplement as Fox Hunt Apartments, representing 
                 
 
 
S-24

 
 
   0.4% of the initial outstanding pool balance, a prior loan secured by the related mortgaged property, which prior loan had been included in a commercial mortgage securitization, was the subject of a discounted payoff in connection with a maturity default. The Fox Hunt Apartments mortgage loan refinanced the loan that had financed such discounted payoff. The same loan sponsor was involved with respect to both the Fox Hunt Apartments mortgage loan and the prior loan that was the subject of the discounted payoff. 
                
 L.
Properties Underwritten
Based on Projections of
Future Income
 
 
Three (3) of the mortgage loans, representing 4.7% of the outstanding pool balance as of the cut-off date, are secured in whole or in part by mortgaged properties that were recently acquired by the related borrowers within 8 calendar months of the cut-off date that, in each case either have no prior operating history or do not have historical financial information.
 
                
 M.
Voluntary Prepayment
Provisions; Defeasance Loans
 
The mortgage loans have the following prepayment and/or defeasance characteristics following the related initial lockout period (which, with respect to the defeasance loans, is no less than 24 months following the closing date of the securitization), as described below:
 
                
   Defeasance and Prepayment 
                
       
Number of
Mortgage
Loans
 
Aggregate
Cut-off Date
Balance
 
% of Initial
Outstanding
Pool
Balance
 
   
Defeasance(1)(2)
 35  $760,099,704  80.8% 
   Yield Maintenance 3  90,977,429  9.7% 
   Lockout/Yield Maintenance 4  79,190,885  8.4% 
   
Yield Maintenance/ Defeasance(3)
 1  11,000,000  1.2% 
   Total 43  $941,268,017  100.0% 
                
      
   (1)All of the mortgage loans that permit defeasance prohibit defeasance until at least 2 years after the closing date. 
                
   (2)Includes the mortgage loan secured by the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as Puerto Rico Retail Portfolio, which also provides for a partial prepayment with yield maintenance of the mortgage loan in connection with the release of an outparcel. 
                
   (3)Includes the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as BJ’s Wholesale Pittsfield, which permits the related borrower to prepay the mortgage loan in full at any time (such prepayment to be accompanied by a yield maintenance charge if prior to the prepayment open period) or to defease the mortgage loan following the second anniversary of the closing date. 
   
 
 
 
 
 
 
 
 
 
 
 
            
 
 
S-25

 
 
   All of the mortgage loans that permit voluntary prepayment or defeasance require that the prepayment or defeasance be made on the due date or, if on a different date, that any prepayment or defeasance be accompanied by the interest that would be due on the next due date. 
                
   Lock-Out Period for Yield Maintenance Loans 
                
   Except as described in the footnotes below, each of the yield maintenance loans listed in the table below permits prepayment with a yield maintenance charge (which amount is at least 1% of the prepaid amount, except in the case of 1 mortgage loan noted below), in certain circumstances, following a lock-out period as indicated in the following table: 
                
   Mortgage Loan 
Aggregate
Cut-off Date
Principal
Balance
 
% of Initial
Outstanding
Pool
Balance
 
Lock-Out
Period
(months from
Cut-off Date)
 
   Hartman Portfolio $56,514,846  6.0% 0  
   Rio Apartments $18,479,935  2.0% 0  
   Treetop Apartments $15,982,647  1.7% 0  
   Piatt Place $33,500,000  3.6% 24  
   Vernola Marketplace $23,561,921  2.5% 4  
   BB&T Headquarters Building $15,328,964  1.6% 24  
   
BJ’s Wholesale Pittsfield(1)
 $11,000,000  1.2% 0  
   Alrig Portfolio $6,800,000  0.7% 24  
                
                
   (1)Permits the related borrower to prepay the mortgage loan in full at any time (such prepayment to be accompanied by a yield maintenance charge if prior to the prepayment open period) or to defease the mortgage loan following the second anniversary of the closing date. 
                
   The mortgage loans that are subject to yield maintenance provisions generally permit voluntary prepayment without the payment of any penalty on the last 1 to 7 scheduled payment dates (through and including the maturity date or the Anticipated Repayment Date). 
                
 N.
Certain Variances from
Underwriting Standards
 
The mortgage loans German American Capital Corporation is selling to the depositor (other than the mortgage loan that was originated by an affiliate of J.P. Morgan Investment Management Inc. and acquired by German American Capital Corporation) were originated in accordance with German American Capital Corporation’s underwriting standards, as set forth under “The Sponsors, Mortgage Loan Sellers and Originators—German American Capital Corporation—GACC’s Underwriting Standards” in this prospectus supplement, except as described under “—GACC’s Underwriting Standards—Exceptions.”  The mortgage loan that was originated by an affiliate of J.P. Morgan Investment Management Inc. and acquired by German American Capital Corporation does not conform in all respects with German American Capital Corporation’s underwriting guidelines and was not originated for securitization, as further described under “Risk Factors—Risks Related to the Mortgage Loans—Certain Mortgage Loans Were Not Specifically Originated for Securitization” and “The Sponsors, Mortgage Loan Sellers and Originators—German American Capital Corporation—GACC’s Underwriting Standards—Exceptions” in this prospectus supplement.
 
   
 
 
            
 
 
S-26

 
 
   
The mortgage loans Ladder Capital Finance LLC is selling to the depositor were originated in accordance with Ladder Capital Finance LLC’s underwriting standards, as set forth under “The Sponsors, Mortgage Loan Sellers and Originators—Ladder Capital Finance LLC—Ladder Capital Group’s Underwriting Guidelines and Processes” in this prospectus supplement, except as described under “—Ladder Capital Group’s Underwriting Guidelines and Processes—Exceptions.”
 
     
   
The mortgage loans Guggenheim Life and Annuity Company is selling to the depositor were originated in accordance with Guggenheim Life and Annuity Company’s underwriting standards, as set forth under “The Sponsors, Mortgage Loan Sellers and Originators—Guggenheim Life and Annuity Company—GLAC’s Underwriting Standards” in this prospectus supplement.
 
     
 O.
Mortgage Loans with
Related Borrowers
 
Four (4) groups of mortgage loans have related borrowers that are affiliated with one another through partial or complete direct or indirect common ownership, with the top 3 groups representing 5.4%, 4.4% and 3.7%, respectively, of the outstanding pool balance as of the cut-off date. The foregoing is in addition to any particular mortgage loan that has multiple affiliated borrowers.
 
     
 P.Significant Mortgage Loans  
                              
 Ten Largest Mortgage Loans or Groups of Cross-Collateralized Mortgage Loans 
                              
 Mortgage Loan 
Cut-off Date
Balance
 
% of Initial
Outstanding
Pool Balance
 
Mortgage
Rate
 
Remaining
Term
 
U/W
NCF
DSCR
 
Cut-off
Date LTV
 
LTV Ratio
at
Maturity
 
U/W NOI
Debt
Yield
 
  Square One Mall $99,779,556  10.6% 5.473% 118  1.84x 49.6% 41.5% 13.2% 
  Union Square Retail $75,000,000  8.0% 4.880% 114  4.12x 24.2% 24.2% 21.5% 
  Puerto Rico Retail Portfolio $57,750,000  6.1% 5.850% 120  1.59x 67.6% 57.1% 12.0% 
  
Hartman Portfolio(1)
 $56,514,846  6.0% 6.500% 79  1.34x 62.7% 56.5% 12.5% 
  180 Peachtree Street $54,888,798  5.8% 5.930% 118  1.62x 57.8% 49.0% 12.4% 
  Hampshire Multifamily Portfolio $54,793,389  5.8% 6.110% 116  1.32x 65.9% 56.3% 10.9% 
  Alamance Crossing $50,454,122  5.4% 5.830% 112  1.35x 69.4% 59.1% 10.2% 
  Brea Plaza Shopping Center $43,451,656  4.6% 6.322% 119  1.22x 65.8% 56.4% 9.6% 
  
Rio Apartments(2)
 $18,479,935  2.0% 6.500% 59  1.45x 65.4% 61.6% 11.5% 
  
Treetop Apartments(2)
 $15,982,647  1.7% 6.500% 59  1.45x 65.4% 61.6% 11.5% 
  Piatt Place $33,500,000  3.6% 5.500% 120  1.45x 74.3% 65.1% 10.2% 
  Total/Wtd. Avg. $560,594,950  59.6% 5.806% 110  1.86x 57.3% 49.9% 13.0% 
                            
                              
 (1)Does not include the non-pooled component of the Hartman Portfolio mortgage loan. 
                              
 (2)The Rio Apartments mortgage loan and the Treetop Apartments mortgage loan, collectively representing 3.7% of the outstanding pool balance as of the cut-off date, are cross-collateralized and cross-defaulted with each other. 
    
  For a brief summary of the 10 largest mortgage loans or groups of cross-collateralized mortgage loans in the pool of mortgage loans, see Annex B to this prospectus supplement. 
    
 
 
S-27

 
 
    
ADDITIONAL CONSIDERATIONS
 
  
See “Description of the Offered Certificates—Appraisal Reductions” in this prospectus supplement.
 
    
 Optional Termination
On any distribution date on which the remaining aggregate principal balance of the mortgage loans is less than 1.0% of the aggregate principal balance of all of the mortgage loans (including the non-pooled component of the Hartman Portfolio mortgage loan) as of the cut-off date, each of (i) the holder of the majority interest of the controlling class, (ii) the special servicer or (iii) the master servicer, in that order, may exercise an option to purchase all of the mortgage loans (including the non-pooled component of the Hartman Portfolio mortgage loan and all property acquired through the exercise of remedies in respect of any mortgage loan). Exercise of this option will affect the termination of the issuing entity and retirement of the then outstanding certificates. The issuing entity could also be terminated in connection with an exchange by a sole remaining certificateholder of all the then outstanding certificates (including the Class X-ALA, Class X-B certificates and Class HP certificates), excluding the Class V, Class R and Class LR certificates (provided, however, that the Class A-1 through Class D certificates are no longer outstanding) for the mortgage loans remaining in the issuing entity, and the sole remaining certificateholder makes a payment to the certificate administrator and the master servicer as described under “The Pooling and Servicing Agreement—Optional Termination” in this prospectus supplement.
 
    
  
See “The Pooling and Servicing Agreement—Optional Termination” in this prospectus supplement and “Description of Certificates—Termination” in the prospectus.
 
    
 Repurchase Obligation
Each mortgage loan seller will make certain representations and warranties with respect to the mortgage loans sold by such mortgage loan seller, as described in this prospectus supplement under “The Pooling and Servicing Agreement—Representations and Warranties; Repurchase; Substitution.” If a mortgage loan seller has been notified of a breach of any of its representations and warranties or a defect in the documentation of any of the mortgage loans sold by it, which breach or defect materially and adversely affects the value of the subject mortgage loan, the value of the related mortgaged property or the interests of the trustee in the subject mortgage loan or the related mortgaged property, then that mortgage loan seller or an affiliate will be required to either cure the breach, repurchase the affected mortgage loan from the issuing entity, replace the affected mortgage loan with another mortgage loan or make a cash payment in lieu of such cure, repurchase or replacement as described under “The Pooling and Servicing Agreement—Representations and Warranties; Repurchase; Substitution” in this prospectus supplement. If the related mortgage loan seller or its affiliate, as applicable, opts to repurchase the affected mortgage loan, the repurchase would have the same effect on the offered certificates as a prepayment in full of the affected mortgage loan, except that the repurchase will
 
    
 
 
S-28

 
 
  not be accompanied by any prepayment premium or yield maintenance charge. 
     
 
Sale of Defaulted Mortgage
Loans and REO Properties
 
Pursuant to the pooling and servicing agreement, the special servicer is required to solicit offers for defaulted mortgage loans (including with respect to the Hartman Portfolio mortgage loan, the non-pooled component) and REO properties and accept the first (and, if multiple bids are contemporaneously received, the highest) cash bid from any person that constitutes a fair price for the defaulted mortgage loan or REO property, determined as described in “The Pooling and Servicing Agreement—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus supplement, unless the special servicer determines, in its reasonable and good faith judgment, that rejection of such offer would be in the best interests of the certificateholders, as a collective whole as if such certificateholders constituted a single lender. See “The Pooling and Servicing Agreement—Sale of Defaulted Mortgage Loans and REO Properties” in this prospectus supplement. In addition, (i) the holder of a mezzanine loan and (ii) the holders of the Class HP certificates with respect to the Hartman Portfolio mortgage loan generally have the right to purchase a defaulted mortgage loan as described under “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Other Financing” and “—Split Loan Structures” in this prospectus supplement.
 
     
 Conflicts of InterestThe relationships between the parties to this transaction and the activities of those parties or their affiliates may give rise to certain conflicts of interest. These conflicts of interests may arise from, among other things, the following relationships and activities: 
     
  the ownership of any certificates by the depositor, mortgage loan sellers, underwriters, master servicer, special servicer, trustee, certificate administrator, operating advisor or any of their affiliates; 
     
  
the relationships, including financial dealings, of the mortgage loan sellers, master servicer, special servicer, the operating advisor or any of their affiliates with any borrower or sponsor; 
     
  
the obligation of the special servicer to take actions at the direction of the directing holder; 
     
  
the broker-dealer activities of the underwriters and their affiliates, including taking long or short positions in the certificates or entering into credit derivative transactions with respect to the certificates; 
     
  
the opportunity of the initial investor in the Class E, Class F, and Class G certificates to request the removal or re-sizing of or other changes to the features of some or all of the mortgage loans; and 
     
  
the activities of the master servicer, special servicer, mortgage loan sellers or any of their affiliates in connection with any other transaction. 
     
 
 
S-29

 
 
  
See “Risk Factors—Risks Related to Conflicts of Interest” in this prospectus supplement.
 
     
 
Certain Federal Income
Tax Consequences
 
Elections will be made to treat portions of the issuing entity (exclusive of the excess interest and the Alamance Crossing interest strip described under “Description of the Offered Certificates—Distributions” in this prospectus supplement) as three separate REMICs, known as the “Hartman Portfolio Mortgage Loan REMIC”, the “Lower-Tier REMIC” and the “Upper-Tier REMIC” (each, a “Trust REMIC”) for federal income tax purposes. In the opinion of counsel, such portions of the issuing entity will qualify for this treatment pursuant to their elections.
 
     
  The Class R certificates will represent the sole class of “residual interests” in the Upper-Tier REMIC, and the Class LR certificates will represent sole class of residual interests in the Hartman Portfolio Mortgage Loan REMIC and the Lower-Tier REMIC. 
     
  
In addition, in the opinion of counsel, the portions of the issuing entity consisting of (i) excess interest, which is beneficially owned by the holders of the Class V certificates, and related amounts in the Class V Distribution Account and (ii) the Alamance Crossing Interest Strip, which is beneficially owned by the holders of the Class X-ALA certificates, and related amounts in the Class X-ALA Distribution Account, will be treated as a grantor trust for federal income tax purposes, as further described under “Certain Federal Income Tax Consequences” in this prospectus supplement.
 
     
  Federal income tax consequences of an investment in the certificates offered in this prospectus supplement include: 
     
  
Each class of certificates (other than the Class V, Class X-ALA, Class R and Class LR certificates) will constitute a class of “regular interests” in the Upper-Tier REMIC. 
     
  
The certificates (other than the Class V, Class R and Class LR certificates) will be treated as newly originated debt instruments for federal income tax purposes. 
     
  
It is anticipated that the Class A-1, Class A-2, Class A-3, Class A-4, Class A-M and Class B certificates will be issued at a premium and that the Class C certificates will be issued with a de minimis amount of original issue discount for federal income tax purposes.
 
     
  
See “Certain Federal Income Tax Consequences” in this prospectus supplement.
 
     
 ERISA ConsiderationsA fiduciary of an employee benefit plan should review with its legal advisors whether the purchase or holding of the certificates offered by this prospectus supplement could give rise to a transaction that is prohibited or is not otherwise permitted under either the Employee Retirement Income Security Act of 1974, as amended, or Section 4975 of the Internal Revenue Code of 1986, as amended, or whether there exists any statutory, regulatory or administrative exemption applicable thereto. The U.S. Department 
     
 
 
S-30

 
 
  
of Labor has granted to Deutsche Bank Securities Inc. an administrative exemption, Department Final Authorization Number 97-03E, as amended by Prohibited Transaction Exemption 2007-5, which generally exempts from the application of certain of the prohibited transaction provisions of Section 406 of the Employee Retirement Income Security Act of 1974, as amended, and the excise taxes imposed on such prohibited transactions by Sections 4975(a) and (b) of the Internal Revenue Code of 1986, as amended, transactions relating to the purchase, sale and holding of pass-through certificates sold by the underwriters and the servicing and operation of the related asset pool, provided that certain conditions are satisfied.
 
    
  
The depositor expects that the exemption granted to Deutsche Bank Securities Inc. will generally apply to the certificates offered in this prospectus supplement; provided that certain conditions are satisfied. See “ERISA Considerations” in this prospectus supplement and “Certain ERISA Considerations” in the prospectus.
 
    
 RatingsIt is a condition to the issuance of the offered certificates that each class of the offered certificates will receive investment grade credit ratings from two nationally recognized statistical rating organizations engaged by the depositor to rate the offered certificates. 
    
  
See “Ratings” in this prospectus supplement and “Rating” in the prospectus for a discussion of the basis upon which ratings are given, the limitations of and restrictions on the ratings, and the conclusions that should not be drawn from a rating. Each of the nationally recognized statistical rating organizations engaged by the depositor to rate the offered certificates has agreed to perform rating surveillance with respect to its ratings for so long as the certificates remain outstanding. Fees for such ratings surveillance will be paid by the depositor.
 
    
  A rating is not a recommendation to purchase, hold or sell the related certificates. Any rating agency that rates the certificates may, in its discretion, lower or withdraw its rating at any time as to any class of certificates. None of the relevant parties (including, without limitation, the issuing entity, the depositor, the sponsors, the servicers, the certificate administrator, the trustee, the operating advisor and their affiliates) will be required to monitor any changes to any ratings on the certificates. 
    
  A rating assigned to any class of certificates by a rating agency that has not been engaged by the depositor to do so may be lower than the rating assigned by the rating agencies engaged by the depositor. 
    
  Nationally recognized statistical rating organizations that the depositor has not engaged to rate the offered certificates may nevertheless issue unsolicited credit ratings on one or more classes of certificates, relying on information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended. If any such unsolicited ratings are issued, we cannot assure you that they will not be different from any ratings assigned 
 
 
S-31

 
 
  by a rating agency engaged by the depositor. The issuance of unsolicited ratings of one or more classes of the offered certificates that are different from the ratings assigned by the rating agencies engaged by the depositor may adversely impact the liquidity, market value and regulatory characteristics of that class or those classes of offered certificates. 
    
  As part of the process of obtaining ratings for the offered certificates, the depositor had initial discussions with and submitted certain materials to certain nationally recognized statistical rating organizations. Based on preliminary feedback from those nationally recognized statistical rating organizations at that time, the depositor selected two of those nationally recognized statistical rating organizations to rate the offered certificates and did not select the other nationally recognized statistical rating organizations due, in part, to those nationally recognized statistical rating organizations’ initial subordination levels for the various classes of offered and non-offered certificates. Had the depositor selected such other nationally recognized statistical rating organizations to rate the offered certificates, we cannot assure you as to the ratings that such other nationally recognized statistical rating organizations would ultimately have assigned to the offered certificates. Although unsolicited ratings may be issued by any nationally recognized statistical rating organization, a nationally recognized statistical rating organization might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the depositor. 
    
  Neither the depositor nor any other person or entity will have any duty to notify you if any nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, unsolicited ratings on one or more classes of offered certificates after the date of this prospectus supplement. In no event will rating agency confirmations from any nationally recognized statistical rating organization (other than the rating agencies engaged by the depositor) be a condition to any action, or the exercise of any right, power or privilege by any person or entity under the pooling and servicing agreement. 
    
  
Furthermore, the Securities and Exchange Commission may determine that either or both of the rating agencies engaged by the depositor to rate the offered certificates no longer qualifies as a nationally recognized statistical rating organization, or is no longer qualified to rate the offered certificates, and that determination may have an adverse effect on the liquidity, market value and regulatory characteristics of the offered certificates. See “Risk Factors—Risks Related to the Offered Certificates—Ratings of the Offered Certificates” and “Ratings” in this prospectus supplement and “Rating” in the prospectus for more information.
 
    
 Legal InvestmentThe certificates will not constitute “mortgage related securities” within the meaning of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements, or review by regulatory authorities, then you may be subject to restrictions on investment in the 
    
 
 
S-32

 
 
  
certificates. You should consult your own legal advisors for assistance in determining the suitability and consequences of the purchase, ownership, and sale of the certificates. See “Legal Investment” in this prospectus supplement and the prospectus.
 
    
 
Denominations; Clearance
and Settlement
 
The certificates offered in this prospectus supplement will be issuable in registered form, in minimum denominations of certificate balance of $10,000.
 
    
  Investments in excess of the minimum denominations may be made in multiples of $1. 
    
  You may hold your certificates through (i) The Depository Trust Company (“DTC”) (in the United States) or (ii) Clearstream Banking Luxembourg, a division of Clearstream International, société anonyme (“Clearstream”) or The Euroclear System (“Euroclear”) (in Europe). Transfers within DTC, Clearstream or Euroclear will be in accordance with the usual rules and operating procedures of the relevant system. See “Description of the Offered Certificates—Delivery, Form and Denomination,” “—Book-Entry Registration” and “—Definitive Certificates” in this prospectus supplement and “Description of the Certificates—Book-Entry Registration and Definitive Certificates” in the prospectus. 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S-33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
[THIS PAGE IS INTENTIONALLY LEFT BLANK]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
S-34

 
 
RISK FACTORS
 
You should carefully consider the following risks and those risks described in “Risk Factors” in the prospectus before making an investment decision.  In particular, the timing and amount of distributions on your certificates will depend on payments received on and other recoveries with respect to the mortgage loans.  Therefore, you should carefully consider the risk factors relating to the mortgage loans and the mortgaged properties.
 
If any of the following events or circumstances identified as risks actually occur or materialize, your investment could be materially and adversely affected.  We note that additional risks and uncertainties not presently known to us may also impair your investment.
 
This prospectus supplement also contains forward-looking statements that involve risks and uncertainties.  Actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this prospectus supplement.
 
General Risks
 
The Offered Certificates May Not Be a Suitable Investment for You
 
The offered certificates are not suitable investments for all investors.  In particular, you should not purchase any class of certificates unless you understand and are able to bear the prepayment, credit, liquidity and market risks associated with that class of certificates.  For those reasons and for the reasons set forth in these “Risk Factors,” the yield to maturity and the aggregate amount and timing of distributions on the offered certificates are subject to material variability from period to period and over the life of the offered certificates.  The interaction of the foregoing factors and their effects are impossible to predict and are likely to change from time to time.  As a result, an investment in the offered certificates involves substantial risks and uncertainties and should be considered only by sophisticated investors with substantial investment experience with similar types of securities.
 
Risks Related to Market Conditions
 
The Credit Crisis and Downturn in the Real Estate Market Have Adversely Affected the Value of Commercial Mortgage-Backed Securities
 
Over the past several years, events in the real estate and securitization markets, as well as the debt markets generally, have caused significant dislocations, illiquidity and volatility in the market for commercial mortgage-backed securities, as well as in the wider global financial markets.  Declining real estate values, coupled with diminished availability of leverage and/or refinancings for commercial real estate has resulted in increased delinquencies and defaults on commercial mortgage loans.  In addition, the downturn in the general economy has affected the financial strength of many commercial real estate tenants and has resulted in increased rent delinquencies and increased vacancies, particularly in the retail sector.  Any continued downturn may lead to increased vacancies, decreased rents or other declines in income from, or the value of, commercial real estate, which would likely have an adverse effect on commercial mortgage-backed securities that are backed by loans secured by such commercial real estate and thus affect the values of such commercial mortgage-backed securities.  We cannot assure you that the dislocation in the commercial mortgage-backed securities market will not continue to occur or become more severe.  Even if the commercial mortgage-backed securities market does recover, the mortgaged properties and therefore, the offered certificates, may decline in value.  Any further economic downturn may adversely affect the financial resources of the borrowers under the mortgage loans and may result in the inability of the borrowers to make principal and interest payments on, or refinance, the outstanding debt when due or to sell the mortgaged properties for an aggregate amount sufficient to pay off the outstanding debt when due.  In the event of default by the borrowers under the mortgage loans, the issuing entity may suffer a partial or total loss allocable to the offered certificates.  Any delinquency or
 
 
S-35

 
 
loss on the mortgage loans may have an adverse effect on the distributions of principal and interest received by holders of the offered certificates.
 
In addition to credit factors directly affecting commercial mortgage-backed securities, the continuing fallout from a downturn in the residential mortgage-backed securities market and markets for other asset-backed and structured finance products has also affected the commercial mortgage-backed securities market by contributing to a decline in the market value and liquidity of securitized investments such as commercial mortgage-backed securities.  The deterioration of other structured finance products markets may continue to adversely affect the value of commercial mortgage-backed securities.  Even if commercial mortgage-backed securities are performing as anticipated, the value of such commercial mortgage-backed securities in the secondary market may nevertheless decline as a result of a deterioration in general market conditions for other asset-backed or structured finance products.  Trading activity associated with commercial mortgage-backed securities indices may also drive spreads on those indices wider than spreads on commercial mortgage-backed securities, thereby resulting in a decrease in value of such commercial mortgage-backed securities.
 
The Volatile Economy and Credit Crisis May Increase Loan Defaults and Affect the Value and Liquidity of Your Investment
 
The global economy recently experienced a significant recession, as well as a severe, ongoing disruption in the credit markets, including the general absence of investor demand for and purchases of commercial mortgage-backed securities and other asset-backed securities and structured financial products.  Although the United States economy, by some measurements, may be emerging from the recession, any recovery could be fragile and unsustainable, in which circumstances another, possibly more severe, recession may ensue.  The global recession and financial crisis have resulted in increased vacancies, decreased rents and/or other declines in income from, or the value of, commercial real estate.  Additionally, a significant contraction in the availability of commercial mortgage financing, together with higher mortgage rates and decreases in commercial real estate values, have prevented many commercial mortgage borrowers from refinancing their maturing mortgage loans or selling their properties for proceeds sufficient to retire such loans.  These circumstances have significantly increased delinquency and default rates of securitized commercial mortgage loans over the last several years, with defaults occurring throughout the United States.  In addition, the declines in commercial real estate values have resulted in reduced borrower equity, which circumstances tend to give a borrower less incentive to cure delinquencies and avoid foreclosure.  Those declines in value have thus tended to result in lower recoveries and greater losses upon foreclosure sale or other liquidation.  Defaults, delinquencies and losses have further decreased property values, thereby resulting in additional defaults by commercial mortgage borrowers, further credit constraints, further declines in property values and further adverse effects on the perception of the value of commercial mortgage-backed securities.  Although certain commercial mortgage lenders have made financing more available in recent months, the commercial real estate markets generally continue to experience persistent weakness, and further, the credit markets remain tight and financing availability remains limited and declines may occur in real estate values.
 
Heightened Underwriting Standards May Contribute to Losses on Commercial Loans
 
Many commercial mortgage lenders have tightened their loan underwriting standards, which has reduced the availability of mortgage credit to prospective borrowers.  These developments have contributed, and may continue to contribute, to a weakening in the commercial real estate market as these adjustments have, among other things, inhibited refinancing and reduced the number of potential buyers of commercial real estate.  The continued use or further adjustment of these loan underwriting standards may contribute to further increases in delinquencies and losses on commercial mortgage loans generally.
 
 
S-36

 
 
Global Market Disruptions and Recent U.S. Legislation May Adversely Affect the Availability of Credit for Commercial Real Estate
 
In addition, the financial crisis that emerged in 2008 and ensuing events have resulted in a substantial level of uncertainty in the financial markets, particularly with respect to mortgage related investments.  The responses to such crisis and events have included, among other things:
 
 
numerous actions of monetary and fiscal authorities in the United States and Europe, such as the conservatorship and the control by the U.S. government since September 2008 of the Federal Home Loan Mortgage Corporation (commonly referred to as Freddie Mac) and the Federal National Mortgage Association (commonly referred to as Fannie Mae);
 
 
the establishment of the Troubled Asset Relief Program through the Emergency Economic Stabilization Act of 2008 and resulting public investments in numerous financial institutions and other enterprises; and
 
 
the adoption or revision, or proposed adoption or revision, of statutes and regulations governing securitization markets in the United States and Europe, such as proposed revisions to the Securities and Exchange Commission’s Regulation AB, the adoption of the Federal Deposit Insurance Corporation’s final securitization safe harbor rule, the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the proposed rules on credit risk retention and ongoing and pending regulatory implementation and certain European Union regulatory initiatives.
 
Ongoing developments associated with such responses could further adversely affect the already-constrained availability of credit for commercial real estate, which may in turn affect the performance of the mortgage loans or the performance or value of your certificates.
 
Furthermore, the global financial markets have recently experienced increased volatility due to uncertainty surrounding the level and sustainability of the sovereign debt of various countries.  Much of this uncertainty has related to certain countries, including Greece, Ireland, Spain, Portugal and Italy, that participate in the European Monetary Union and whose sovereign debt is generally denominated in euros, the common currency shared by members of that union.  In addition, some economists, observers and market participants have expressed concerns regarding the sustainability of the monetary union and the common currency in their current form.  Concerns regarding sovereign debt may spread to other countries at any time.  In particular, the pace of progress, or the lack of progress, of federal deficit reduction talks in the United States may cause continued volatility.  In addition, Egypt and Libya are currently undergoing a change in government following widespread protests and other countries in the Middle East, including Syria, are experiencing social unrest.  It is uncertain what effects these protests and change in government will have in Egypt, Libya, Syria or the Middle East, or what effects such events in Egypt, Libya, Syria or the Middle East might have on the United States and world financial markets, particular business segments, world commodity prices or otherwise.  We cannot assure you that this uncertainty will not lead to further disruption of the credit markets in the United States.  Furthermore, many state and local governments in the United States are experiencing, and are expected to continue to experience, severe budgetary strain.  One or more states could default on their debt, or one or more significant local governments could default on their debt or seek relief from their debt under the federal bankruptcy code or by agreement with their creditors.  Any or all of the circumstances described above may lead to further volatility in or disruption of the credit markets at any time.  Moreover, other types of events may affect financial markets, such as war, revolt, insurrection, armed conflict, terrorism, political crisis, natural disasters and man-made disasters.  We cannot predict such matters or their effect on the value or performance of your certificates.
 
 
S-37

 
 
General Conditions in the Commercial Real Estate Mortgage Markets May Adversely Affect the Performance of the Offered Certificates
 
Investors should consider that general conditions in the commercial real estate and mortgage markets may adversely affect the performance of the mortgage loans held by the issuing entity and accordingly the performance of the offered certificates.  In addition, in connection with all the circumstances described above, you should be aware in particular that:
 
 
such circumstances may result in substantial delinquencies and defaults on the mortgage loans and adversely affect the amount of liquidation proceeds the issuing entity would realize in the event of foreclosures and liquidations;
 
 
defaults on the mortgage loans may occur in large concentrations over a period of time, which might result in rapid declines in the value of your certificates;
 
 notwithstanding that the mortgage loans were recently underwritten and originated, the values of the mortgaged properties may decline following the issuance of the offered certificates and such declines may be substantial and occur in a relatively short period following the issuance of the offered certificates; and such declines may or may not occur for reasons largely unrelated to the circumstances of the particular property;
 
 if you determine to sell your offered certificates, you may be unable to do so or you may be able to do so only at a substantial discount from the price you paid; this may be the case for reasons unrelated to the then current performance of the offered certificates or the mortgage loans; and this may be the case within a relatively short period following the issuance of the offered certificates;
 
 if the mortgage loans default, then the yield on your investment may be substantially reduced notwithstanding that liquidation proceeds may be sufficient to result in the repayment of the principal of and accrued interest on your certificates; an earlier-than-anticipated repayment of principal (even in the absence of losses) in the event of a default in advance of the maturity date would tend to shorten the weighted average period during which you earn interest on your investment; and a later-than anticipated repayment of principal (even in the absence of losses) in the event of a default upon the maturity date would tend to delay your receipt of principal and the interest on your investment may be insufficient to compensate you for that delay;
 
 even if liquidation proceeds received on defaulted mortgage loans are sufficient to cover the principal and accrued interest on those mortgage loans, the issuing entity may experience losses in the form of special servicing compensation, interest on advances and other expenses, and you may bear losses as a result, or your yield may be affected by such losses;
 
 the time periods to resolve defaulted mortgage loans may be long, and those periods may be further extended because of borrower bankruptcies and related litigation; and this may be especially true in the case of loans made to borrowers that have, or whose affiliates have, substantial debts other than the mortgage loan, including related subordinate or mezzanine financing;
 
 some participants in the commercial mortgage-backed securities markets have sought permission from the Internal Revenue Service to allow a purchaser of a mortgaged property acquired in respect of a mortgage loan held by a REMIC to assume the extinguished debt in connection with a purchase of that property; if such permission is granted and the special servicer pursues such a resolution strategy, then the receipt of proceeds of a foreclosure property would be delayed for an extended period; and this may occur when it would be in your best interest for the property to be sold for cash, even at a lesser price, with the proceeds distributed to certificateholders;
 
 
S-38

 
 
 trading activity associated with indices of commercial mortgage-backed securities may also drive spreads on those indices wider than spreads on commercial mortgage-backed securities, thereby resulting in a decrease in value of such commercial mortgage-backed securities, including your certificates, and spreads on those indices may be affected by a variety of factors, and may or may not be affected for reasons involving the commercial real estate markets and may be affected for reasons that are unknown and cannot be discerned; and
 
 even if you intend to hold your offered certificates, depending on your circumstances, you may be required to report declines in the value of your certificates, and/or record losses, on your financial statements or regulatory or supervisory reports, and/or repay or post additional collateral for any secured financing, hedging arrangements or other financial transactions that you have entered into that are backed by or make reference to your certificates, in each case as if your certificates were to be sold immediately.
 
In connection with all the circumstances described above, the risks we described elsewhere under “Risk Factors” in this prospectus supplement and the accompanying prospectus are heightened substantially, and you should review and carefully consider such risk factors in light of such circumstances.
 
RISKS RELATED TO THE MORTGAGE LOANS
 
Mortgage Loans Are Nonrecourse and Are Not Insured or Guaranteed
 
Payments under the mortgage loans are not insured, and are either not guaranteed or should not be considered to be, by any person or entity.
 
All of the mortgage loans are or should be considered to be nonrecourse loans.  If a default occurs, the lender’s remedies generally are limited to foreclosing against the borrower and/or the specific mortgaged properties and other assets that have been pledged to secure the mortgage loan, subject to, in some cases, customary nonrecourse carveouts either to the borrower or the loan sponsor.  Even if a mortgage loan is recourse to the borrower (or if a nonrecourse carveout to the borrower applies), in most cases, the borrower’s assets are limited primarily to its interest in the related mortgaged property.  Payment of amounts due under the mortgage loan prior to the maturity date is consequently dependent primarily on the sufficiency of the net operating income of the property.  Even if the mortgage loan provides limited recourse to a principal or affiliate of the related borrower, there is no assurance of any recovery from such principal or affiliate will be made or that such principal’s or affiliate’s assets would be sufficient to pay any otherwise recoverable claim.
 
Payment of a mortgage loan at the maturity date or the anticipated repayment date is primarily dependent upon the market value of the mortgaged property and the borrower’s ability to sell or refinance the mortgaged property for an amount sufficient to repay the mortgage loan.
 
The Offered Certificates Are Limited Obligations and Payments Will Be Primarily Derived from the Mortgage Loans
 
The certificates, when issued, will represent beneficial interests in the issuing entity.  The certificates will not represent an interest in, or obligation of, the sponsors, the mortgage loan sellers, the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the operating advisor or any other person.  The primary assets of the issuing entity will be the mortgage loans, and the primary security and source of payment for the mortgage loans will be the mortgaged properties and the other collateral described in this prospectus supplement.  Payments on the certificates are expected to be derived from payments made by the borrowers on the mortgage loans.  Payment of a mortgage loan at the maturity date or anticipated repayment date is primarily dependent upon the market value of the mortgaged property and the borrower’s ability to sell or refinance the mortgaged property for an amount sufficient to repay the mortgage loan.  We cannot assure you that the cash flow from the mortgaged
 
 
S-39

 
 
properties and the proceeds of any sale or refinancing of the mortgaged properties will be sufficient to pay the principal of, and interest on, the mortgage loans or to distribute in full the amounts of interest and principal to which the holders of the certificates are entitled.  See “Description of the Offered Certificates—General” in this prospectus supplement.
 
Commercial Lending Is Dependent upon Net Operating Income
 
The mortgage loans are secured by various types of income-producing commercial properties.  Commercial mortgage loans are generally thought to expose a lender to greater risk than one to four family residential loans.  The repayment of a commercial loan is typically dependent upon the ability of the related mortgaged property to produce cash flow through the collection of rents.  Even the liquidation value of a commercial property is determined, in substantial part, by the amount of the mortgaged property’s cash flow (or its potential to generate cash flow).  However, net operating income and cash flow are often based on assumptions regarding tenant behavior and market conditions.  Net operating income and cash flow can be volatile over time and may be insufficient to cover debt service on the mortgage loan at any given time.  Lenders typically look to the debt service coverage ratio (that is, the ratio of net cash flow to debt service) of a mortgage loan secured by income-producing property as an important measure of the risk of default of that mortgage loan.
 
The net operating income, cash flow and property value of the mortgaged properties may be adversely affected by a large number of factors.  Some of these factors relate to the mortgaged property itself, such as:
 
 the age, design and construction quality of the mortgaged property;
 
 perceptions regarding the safety, convenience and attractiveness of the mortgaged property;
 
 the characteristics of the neighborhood where the mortgaged property is located;
 
 the proximity and attractiveness of competing properties;
 
 the adequacy of the mortgaged property’s management and maintenance;
 
 increases in interest rates, real estate taxes and other operating expenses at the mortgaged property and in relation to competing properties;
 
 an increase in the capital expenditures needed to maintain the mortgaged property or make improvements;
 
 the dependence upon a single tenant, or a concentration of tenants in a particular business or industry;
 
 a decline in the financial condition of a major tenant;
 
 an increase in vacancy rates for the applicable property type in the relevant geographic area; and
 
 a decline in rental rates as leases are renewed or entered into with new tenants.
 
Certain mortgaged properties are secured in whole or in part by recently constructed mortgaged properties or recently acquired properties that have no prior operating history and lack historical financial figures and information.  Forty-two (42) of the mortgage loans, representing approximately 94.0% of the outstanding pool balance as of the cut-off date, were originated within 9 months prior to the cut-off date.  Consequently, these mortgage loans do not have a long-standing payment history.
 
 
S-40

 
 
Other factors are more general in nature, such as:
 
 national, regional or local economic conditions (including plant closings, military base closings, industry slowdowns and unemployment rates);
 
 local real estate conditions (such as an oversupply of competing properties, space, multifamily housing, manufactured housing, or hotel capacity);
 
 demographic factors;
 
 consumer confidence;
 
 consumer tastes and preferences;
 
 retroactive changes in building codes;
 
 changes or continued weakness in specific industry segments;
 
 location of certain mortgaged properties in less densely populated or less affluent areas; and
 
 the public’s perception of safety for customers and clients.
 
The volatility of net operating income will be influenced by many of the foregoing factors, as well as by:
 
 the length of tenant leases (including that in certain cases, all or substantially all of the tenants, or one or more sole, anchor or other tenants, at a particular mortgaged property have leases that expire or permit the tenant(s) to terminate its or their lease(s) during the term of the related mortgage loan) and other lease terms, including co-tenancy provisions;
 
 the creditworthiness of tenants;
 
 tenant defaults;
 
 in the case of rental properties, the rate at which vacant space or space under expiring leases is re-let; and
 
 
the mortgaged property’s “operating leverage” (i.e., the percentage of total property expenses in relation to revenue, the ratio of fixed operating expenses to those that vary with revenues, and the level of capital expenditures required to maintain the property and to retain or replace tenants).
 
A decline in the real estate market or in the financial condition of a major tenant will tend to have a more immediate effect on the net operating income of mortgaged properties with short-term revenue sources, such as short-term or month-to-month leases or leases with termination options, and may lead to higher rates of delinquency or defaults under the related mortgage loans.
 
In addition, underwritten or adjusted cash flows, by their nature, are speculative and are based upon certain assumptions and projections.  The failure of these assumptions or projections in whole or in part could cause the underwritten or adjusted cash flows to vary substantially from the actual cash flows of a mortgaged property.  See “Risk Factors—Underwritten Net Cash Flow and Stabilized Values May Be Based on Flawed Assumptions” in the prospectus.
 
For a description of the calculation of underwritten net operating income for the mortgaged property identified on Annex A-1 to this prospectus supplement as Union Square Retail, which mortgaged property secures a mortgage loan that represents 8.0% of the outstanding pool balance as of the cut-off date, see
 
 
S-41

 
 
Description of the Mortgage Pool—Additional Mortgage Loan Information—Definitions” in this prospectus supplement.
 
Mortgage Loans Have Not Been Reunderwritten Since Origination
 
We have not reunderwritten the mortgage loans to determine that such mortgage loans were originated in accordance with the related originator’s underwriting guidelines.  Instead, we have relied on the representations and warranties made by the sponsors, and each sponsor’s obligation to repurchase, substitute or cure a mortgage loan in the event that a representation or warranty was not true when made and such breach materially and adversely affects the value of the mortgage loan, the value of the related mortgaged property or the interests of the trustee in the mortgage loan or the related mortgaged property.  The representations and warranties may not cover all of the matters that one would review in underwriting a mortgage loan and you should not view them as a substitute for reunderwriting the mortgage loans.  Furthermore, these representations and warranties in some respects represent an allocation of risk rather than a confirmed description of the mortgage loans, although the sponsors have not made representations and warranties that they know to be untrue (subject to the exceptions described in the applicable mortgage loan purchase agreement and attached to this prospectus supplement in Annex G).  If we had reunderwritten the mortgage loans to determine that such mortgage loans were originated in accordance with the related originator’s underwriting guidelines, it is possible that the reunderwriting process may have revealed problems with a mortgage loan not covered by a representation or warranty or may have revealed inaccuracies in the representations and warranties.  In addition, we cannot assure you that the applicable sponsor will be able to repurchase or substitute a mortgage loan if a representation or warranty has been breached.  See “—Risks Related to the Offered Certificates—A Mortgage Loan Seller May Not Be Able to Make a Required Repurchase or Substitution of a Defective Mortgage Loan” and “The Pooling and Servicing Agreement—Representations and Warranties; Repurchase; Substitution” in this prospectus supplement.
 
The Prospective Performance of the Commercial and Multifamily Mortgage Loans Included in the Issuing Entity Should Be Evaluated Separately from the Performance of the Mortgage Loans in Any of the Depositor’s Other Trusts
 
While there may be certain common factors affecting the performance and value of income-producing real properties in general, those factors do not apply equally to all income-producing real properties and, in many cases, there are unique factors that will affect the performance and/or value of a particular income-producing real property.  Moreover, the effect of a given factor on a particular real property will depend on a number of variables, including but not limited to property type, geographic location, competition, sponsorship and other characteristics of the property and the related mortgage loan.  Each income-producing real property represents a separate and distinct business venture; and, as a result, each of the multifamily and commercial mortgage loans included in one of the depositor’s trusts requires a unique underwriting analysis.  Furthermore, economic and other conditions affecting real properties, whether worldwide, national, regional or local, vary over time.  The performance of a pool of mortgage loans originated and outstanding under a given set of economic conditions may vary significantly from the performance of an otherwise comparable mortgage pool originated and outstanding under a different set of economic conditions.  Accordingly, investors should evaluate the mortgage loans underlying the certificates independently from the performance of mortgage loans underlying any other series of offered certificates.
 
As a result of the distinct nature of each pool of commercial mortgage loans, and the separate mortgage loans within the pool, this prospectus supplement does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by the sponsor of assets of the type to be securitized (known as “static pool data”).  Because of the highly heterogeneous nature of the assets in commercial mortgage-backed securities transactions, static pool data for prior securitized pools, even those involving the same asset types (e.g., hotels or office buildings), may be misleading, since the economics of the properties and terms of the mortgage loans may be materially different.  In particular, even if that static pool data showed a low level of delinquencies and defaults, it would not be indicative of the performance of this pool or any other pools of mortgage loans originated by the same sponsor or
 
 
S-42

 
 
sponsors.  Therefore, investors should evaluate this offering on the basis of the information set forth in this prospectus supplement with respect to the mortgage loans, and not on the basis of the performance of other pools of securitized commercial mortgage loans.
 
Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses
 
Some of the mortgaged properties securing the mortgage loans included in the issuing entity (such as  an office property used substantially as a data center) may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason.  Converting commercial properties to alternate uses generally requires substantial capital expenditures and could result in a significant adverse effect on, or interruption of, the revenues generated by such mortgaged properties.  In addition, zoning or other restrictions also may prevent alternative uses.  The liquidation value of any such mortgaged property consequently may be substantially less than would be the case if the property were readily adaptable to other uses.
 
Some of the mortgaged properties have been designated as historic or landmark buildings or are located in areas designated as historic or landmark.  Such properties may have restrictions related to renovations, construction or other restrictions and may not be permitted to be converted to alternative uses because of such restrictions.
 
Some of the mortgaged properties are part of tax-reduction programs that apply only if the mortgaged properties are used for certain purposes.  Such properties may be restricted from being converted to alternative uses because of such restrictions.
 
Limitations of Appraisals
 
Appraisals were obtained with respect to each of the mortgaged properties at or about the time of the origination of the applicable mortgage loan, or in connection with the transfer of mortgage loans to this securitization transaction.  All of the mortgage loans have appraisals dated within the past 12 months.
 
In general, appraisals represent the analysis and opinion of qualified appraisers, but appraisals are not guarantees of present or future value.  One appraiser may reach a different conclusion than the conclusion that would be reached if a different appraiser were appraising that property.  Moreover, the values of the mortgaged properties may have fluctuated significantly since the appraisals were performed.  Moreover, appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller and, in certain cases, may have taken into consideration the purchase price paid by the borrower.  That amount could be significantly higher than the amount obtained from the sale of a mortgaged property under a distress or liquidation sale.  In certain cases, appraisals may reflect both “as-stabilized” and “as-is” values although the appraised value reflected in this prospectus supplement with respect to the mortgaged properties generally reflect only the “as-is” value.
 
In some cases, the related appraisal may value the property on a portfolio basis, which may result in a higher value than the aggregate value that would result from a separate individual appraisal on each mortgaged property.  We cannot assure you that the information set forth in this prospectus supplement regarding appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties.  Any engineering report, site inspection or appraisal represents only the analysis of the individual consultant, engineer or inspector preparing such report at the time of such report, and may not reveal all necessary or desirable repairs, maintenance and capital improvement items.
 
 
S-43

 
 
Property Value May Be Adversely Affected Even When Current Operating Income Is Not
 
Various factors may adversely affect the value of the mortgaged properties without affecting the properties’ current net operating income.  These factors include, among others:
 
 changes in governmental regulations, fiscal policy, zoning or tax laws;
 
 potential environmental legislation or liabilities or other legal liabilities;
 
 the availability of refinancing; and
 
 changes in interest rate levels.
 
Risks Related to Tenants
 
Tenant Concentration Entails Risk
 
A deterioration in the financial condition of a tenant can be particularly significant if a mortgaged property is leased to a single tenant, or if a few tenants make up a significant portion of the rental income.  In the event of a default by a significant tenant, if the related lease expires prior to the mortgage loan maturity date and the related tenant fails to renew its lease or the tenant exercises an early termination right, there would likely be an interruption of rental payments under the lease and, accordingly, insufficient funds available to the borrower to pay the debt service on the mortgage loan.  This is so because: (i) the financial effect of the absence of rental income from such tenant is typically severe; (ii) more time and leasing costs may be required to re-lease the space; (iii) substantial capital costs may be incurred to make the space appropriate for replacement tenants; and (iv) there is no assurance that the space can be re-leased on or near comparable terms.
 
In the case of 2 mortgaged properties, collectively securing 2.2% of the outstanding pool balance as of the cut-off date by allocated loan amount, if applicable, each such related mortgaged property is 100% leased to a single tenant, based on net rentable area (excluding leased fee assets).  In the case of 6 other mortgaged properties, securing 16.1% of the outstanding pool balance as of the cut-off date by allocated loan amount, if applicable, each mortgaged property is leased to one or more significant tenants, with one tenant occupying a net rentable area of 50% or more of the related mortgaged property.  Certain single tenants or significant tenants have lease expiration dates or early termination options that are prior to the related mortgage loan maturity date.  For a list of each mortgaged property leased to a single tenant or a significant tenant, along with the related mortgage loan maturity date (or anticipated repayment date, as applicable) and lease expiration dates, see Annex A-1 to this prospectus supplement.
 
The underwriting of single-tenant mortgage loans is based primarily upon the monthly rental payments due from the tenant under the lease at the related mortgaged property.  In addition, the underwriting for certain single-tenant mortgage loans took into account the creditworthiness of the tenants or lease guarantors under the applicable leases.  Similar analysis may impact the underwriting of mortgage loans with significant tenants.  Accordingly, such single-tenant or significant-tenant mortgage loans may have higher loan-to-value ratios and lower debt service coverage ratios than other types of mortgage loans.  However, there can be no assurance that the assumptions made when underwriting such mortgage loans will be correct, that the related tenant will re-let the premises or that such tenant will maintain its creditworthiness.  See Annex A-1 to this prospectus supplement for lease expiration dates (for the five largest tenants at each retail, office, mixed use and industrial mortgaged property, based on net rentable area) and mortgage loan maturity dates (or anticipated repayment dates, as applicable).  In addition, certain single tenants, or significant tenants, may have specific termination rights under their leases that may be exercised prior to the related mortgage loan maturity date merely upon the giving of notice to the landlord, or upon the occurrence of certain circumstances, including, but not limited to, the failure to timely complete tenant buildouts, casualty with respect to specified portions or percentages of the mortgaged property, failure to meet certain income or occupancy thresholds, if utilities or other essential services are not provided to the subject space, or the landlord otherwise fails to perform under the lease, for a specified period.  Certain of the mortgaged properties are leased in whole or in part by
 
 
S-44

 
 
government-sponsored tenants who may have the right to cancel their leases at any time for lack of appropriations or for other reasons.  There can be no assurance that if a tenant exercises an early termination option prior to or shortly following the mortgage loan maturity date that the related borrower will have adequate cash flow available to satisfy debt service payments or be in a position to refinance the loan.  See “—Certain Additional Risks Related to Tenants” below.  Also, certain single tenants may be affiliated with the related borrower.  See “—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks” below.
 
A pool of mortgage loans also may be adversely affected if there is a concentration of a particular tenant or type of tenant among the related mortgaged properties or of tenants in a particular business or industry.  In these cases, a problem with a particular tenant could have a disproportionately large impact on the pool of mortgage loans and adversely affect distributions to certificateholders.  Similarly, an issue with respect to a particular industry could also have a disproportionately large impact on the pool of mortgage loans.  For additional information regarding significant tenants, see Annex A-1 to this prospectus supplement.
 
Mortgaged Properties Leased to Multiple Tenants Also Have Risks
 
If a mortgaged property has multiple tenants, re-leasing expenditures may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for debt service payments.  Multi-tenanted mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental income and expenses.
 
Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks
 
If a mortgaged property is leased in whole or substantial part to the borrower under the mortgage loan or to an affiliate of the borrower, a deterioration in the financial condition of the borrower or its affiliates can be particularly significant to the borrower’s ability to perform under the mortgage loan as it can directly interrupt the cash flow from the mortgaged property if the borrower’s or its affiliate’s financial condition worsens.  Certain mortgaged properties or portions of those mortgaged properties are (or may in the future be) leased to affiliates of the borrower under arrangements whereby the affiliate tenant (or affiliated subtenant) operates and/or leases the mortgaged property or the leased premises.  Such lease arrangements present additional risks, such as the potential limitations on the ability of a lender upon default to obtain a receiver to obtain control of, and collect the underlying revenues from, the mortgaged property unless and until the affiliate lease is terminated and the affiliate tenant evicted from the mortgaged property or affiliate leased premises (which may not be possible if the affiliate lease is not in default or may be limited by an affiliate tenant bankruptcy or by requirements of local laws pertaining to the dispossession of defaulted tenants under the leases) and the risk that an affiliate lease termination may result in a termination or interruption of rent payments under the underlying subleases between the subtenants and the affiliate tenant.  In addition, in some cases, a master lease with the borrower or an affiliate of the borrower is used to stabilize occupancy or cash flow in situations where it may fluctuate.
 
In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as Union Square Retail, which mortgage loan represents 8.0% of the outstanding pool balance as of the cut-off date, the related borrower holds a leasehold interest in that mortgaged property as the tenant under a 99-year ground lease that is scheduled to expire on December 31, 2095.  Approximately 49.7% of the net rentable area at that mortgaged property is subleased to two (2) wholly-owned subsidiaries of the related borrower, which subsidiaries have, in turn, sub-subleased that portion of the related mortgaged property.
 
In the case of the portfolio of mortgaged properties identified on Annex A-1 to this prospectus supplement as GRM Portfolio, which secure a mortgage loan representing 2.1% of the outstanding pool balance as of the cut-off date, the Chicago Building mortgaged property is 100.0% leased to a wholly-owned subsidiary of GRM, an affiliate of the borrower, and the 10310 Harwin Drive mortgaged property is 55.6% leased to GRM.
 
 
S-45

 
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Westchester I Office, which secures a mortgage loan representing 0.8% of the outstanding pool balance as of the cut-off date, seven of the ten tenants, occupying 79.9% of the net rentable area at that mortgaged property, are affiliated with the related borrower.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Spalding Building, which secures a mortgage loan representing 0.8% of the outstanding pool balance as of the cut-off date, 6.8% of the net rentable area at the mortgaged property is subject to a master lease with a borrower affiliate that is to remain in place until new leases are in place generating the same rent ($118,142 per annum) as that master lease.  Such space is not physically occupied by the related borrower affiliate and such lease is in place solely to stabilize occupancy and cash flow at the related mortgaged property.
 
Certain Additional Risks Related to Tenants
 
The income from, and market value of, the mortgaged properties leased to various tenants would be adversely affected if, among other things:
 
 space in the mortgaged properties could not be leased or re-leased;
 
 the mortgaged property were re-leased at a rental rate below the rental rate paid by the tenant at the space when the mortgage loan was originated;
 
 tenants were unable to meet their lease obligations;
 
 a significant tenant were to become a debtor in a bankruptcy case; or
 
 rental payments could not be collected for any other reason.
 
Repayment of the mortgage loans secured by retail, office and industrial properties will be affected by the expiration or early termination of leases and the ability of the respective borrowers to renew the leases or relet the space on comparable terms.  In this regard, the five largest tenants (based on net rentable area) and their respective lease expiration dates for retail, office and industrial properties are set forth on Annex A-1 to this prospectus supplement.  In certain cases, however, a tenant may have the option to terminate its lease or abate rent prior to the stated lease expiration date.  In some cases, this option may be at any time or after the passage of time.  In other cases, the option is tied to outside contingencies, for example, if the landlord violates the lease or interferes with the tenant’s use of the property, upon casualty or condemnation, if utilities or other essential services are not provided to the space for a specified period, for zoning violations, if certain anchor or key tenants (including at an adjacent property) or a certain number of tenants go dark or cease operations, in connection with the failure to satisfy sales target business objectives or in the case of a government tenant, for lack of appropriations or other reasons.  With respect to any mortgage loan with a government or government agency tenant, it is likely that such tenant’s lease permits the government tenant to terminate the lease prior to the related lease expiration date for lack of appropriations or other reasons.
 
The footnotes to Annex A-1 to this prospectus supplement (but not Annex A-1 itself) identify certain of the non-contingent early termination provisions related to the five largest tenants shown on Annex A-1.  However, such footnotes do not identify all of the early termination options that tenants may have under their leases.  In addition, see “Annex B—Description of the Top 20 Mortgage Loans or Groups of Cross-Collateralized Mortgage Loans” for certain non-contingent early termination provisions related to the five largest tenants shown on Annex A-1 for the 10 largest mortgage loans or groups of cross-collateralized mortgage loans listed on Annex B.
 
Certain of the tenants (which may include significant tenants) have lease expiration dates that occur on or prior to, or shortly following, the maturity date or anticipated repayment date, as applicable, of the related loan.  For the lease expiration dates of the largest five tenants by net rentable area at each retail, office, mixed use and industrial mortgaged property, see Annex A-1 to this prospectus supplement.
 
 
S-46

 
 
Additionally, mortgage loans may have concentrations of leases expiring or providing for early termination options at varying rates in varying percentages on or prior to, or shortly following, the related maturity date.  In some situations, all of the leases at a mortgaged property may expire or be terminated on or prior to, or shortly following, the related maturity date.  In addition, with respect to several of the other mortgage loans, leases representing, in the aggregate, 50% or more of the net rentable area of the related mortgaged property expire during or prior to the calendar year in which the maturity date occurs.  In addition, certain of the tenants (which may include tenants listed on Annex A-1 to this prospectus supplement) have early termination options or options to terminate a portion of the leased premises that occur on or prior to the maturity date of the related mortgage loan.  See Annex A-1 to this prospectus supplement for lease expiration dates for the largest five tenants at each mortgaged property.  See —Risks of Co-Tenancy and Other Early Termination Provisions in Retail and Office Leases” below for a description of the various termination options that many tenants may exercise upon the occurrence of certain contingencies including, without limitation, based on co-tenancy provisions, breaches of the lease terms, casualty and condemnation and property performance.  The footnotes to Annex A-1 to this prospectus supplement provide information as to certain non-contingent termination options; however, the footnotes do not include all such early termination options that may be contained in every lease.
 
Furthermore, certain of the mortgaged properties have: tenant leases that permit a tenant, including a significant tenant, to unilaterally terminate its lease without typical triggers; spaces occupied on a month-to-month tenancy; and/or tenants that have executed leases but are not yet in occupancy and are not open for business.
 
See “—Risks of Co-Tenancy and Other Early Termination Provisions in Retail and Office Leases” below.
 
Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements and leasing commissions, could be substantial and could reduce cash flow from the mortgaged properties.  Moreover, if a tenant defaults on its obligations to a borrower (or if the tenant terminates pursuant to the terms of its lease), the borrower may incur substantial costs and experience significant delays associated with enforcing its rights and protecting its investment, including costs incurred in renovating and reletting the mortgaged property.
 
In addition, a tenant lease that expires or is terminated near, including during a relatively short period following, the maturity date of a mortgage loan may make it more difficult for the borrower to obtain refinancing of the related mortgage loan and may thereby jeopardize repayment of the mortgage loan.
 
Additionally, in certain jurisdictions, if tenant leases are subordinated to the liens created by the mortgage but do not contain attornment provisions (provisions requiring the tenant to recognize a successor owner following foreclosure as landlord under the lease), the leases may terminate at the tenant’s option upon the transfer of the property to a foreclosing lender or purchaser at foreclosure.  Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, that mortgaged property could experience a further decline in value if the tenants’ leases were terminated.
 
Certain of the mortgaged properties may have tenants that are related to or affiliated with a borrower.  In such cases, a default by the borrower may coincide with a default by the affiliated tenants.  Additionally, even if the property becomes an REO property, it is possible that an affiliate of the borrower may remain as a tenant.  See “—Mortgaged Properties Leased to Borrowers or Borrower Affiliated Entities Also Have Risks” above.
 
In addition, various tenants may have rights under their respective leases that can result in substantial costs to the landlord.
 
 
S-47

 
 
Tenant Bankruptcy Entails Risks
 
Any tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction of or failure to make rental payments when due.  If tenants’ sales were to decline, percentage rents may decline and, further, tenants may be unable to pay their base rents or other occupancy costs.  If a tenant defaults in its obligations to a property owner, that property owner may experience delays in enforcing its rights as lessor and may incur substantial costs and experience significant delays associated with protecting its investment, including costs incurred in renovating and reletting the property.
 
The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, in retail, office and industrial properties may adversely affect the income produced by a mortgaged property.  Under the federal bankruptcy code, a tenant has the option of assuming or rejecting or, subject to certain conditions, assuming and assigning to a third party, any unexpired lease.  If the tenant assumes its lease, the tenant must cure all defaults under the lease and provide the landlord with adequate assurance of its future performance under the lease.  If the tenant rejects the lease, the landlord’s claim for breach of the lease would be treated as a general unsecured claim against the tenant (absent collateral securing the claim).  The landlord’s claim would be limited to the unpaid rent due under the lease for the periods prior to the bankruptcy petition (or earlier surrender of the leased premises) that are unrelated to the rejection, plus the greater of one year’s rent or 15% of the remaining reserved rent (but not more than three years’ rent).  If the tenant assigns its lease, the tenant must cure all defaults under the lease and the proposed assignee must demonstrate adequate assurance of future performance under the lease.  Certain of the tenants may be, and may at any time during the term of the related mortgage loan become, a debtor in a bankruptcy proceeding.
 
If the leased premises are located in a “shopping center” as such term has been interpreted under section 365 of the federal bankruptcy code, the assignee may be required to agree to certain conditions that are protective of the property owner, such as compliance with specific lease terms relating to, among other things, exclusivity and the terms of reciprocal easement agreements.  However, we cannot assure you that any mortgaged property (even a mortgaged property identified as a “shopping center” in this prospectus supplement) would be considered a shopping center by a court considering the question.
 
We cannot assure you that tenants of mortgaged properties will continue making payments under their leases or that tenants will not file for (or involuntarily be subjected to) bankruptcy protection in the future or, if any tenants so become debtors under the federal bankruptcy code, that they will continue to make rental payments in a timely manner or that they will not reject their leases.
 
Risks Related to Mortgage Loan Concentration
 
Several of the mortgage loans have cut-off date balances that are substantially higher than the average cut-off date balance.  In general, concentrations in mortgage 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 10 largest mortgage loans or groups of cross-collateralized mortgage loans represent approximately 59.6% of the outstanding pool balance as of the cut-off date.  Losses on any of these mortgage loans may have a particularly adverse effect on the certificates offered in this prospectus supplement.
 
The mortgage loan secured by the mortgaged property identified as Rio Apartments on Annex A-1 to this prospectus supplement and the mortgage loan secured by the mortgaged property identified as Treetop Apartments on Annex A-1 to this prospectus supplement, collectively representing in the aggregate approximately 3.7% of the outstanding pool balance as of the cut-off date, are cross-collateralized and cross-defaulted with each other.  For more information regarding risks associated with cross-collateralization arrangements, see “Risk Factors—Commercial and Multifamily Loans Are Subject to Certain Risks Which Could Adversely Affect the Performance of Your Offered Certificates—Cross-Collateralization Arrangements May Be Challenged as Unenforceable” in the prospectus.
 
 
S-48

 
 
The 20 largest mortgage loans or groups of cross-collateralized and cross-defaulted mortgage loans are described in Annex B to this prospectus supplement.  Each of the mortgage loans or groups of cross-collateralized and cross-defaulted mortgage loans other than the 10 largest mortgage loans or groups of cross-collateralized mortgage loans represents no more than 3.0% of the outstanding pool balance as of the cut-off date.
 
Risks Related to Borrower Concentration
 
Four (4) groups of mortgage loans are made to the same borrower or have related borrowers that are affiliated with one another through partial or complete direct or indirect common ownership, with the largest 3 groups representing 5.4%, 4.4% and 3.7%, respectively, of the outstanding pool balance as of the cut-off date.  A concentration of mortgage loans with the same borrower or related borrowers also can pose increased risks.  For instance, if a borrower that owns several mortgaged properties experiences financial difficulty at one mortgaged property, or at another income-producing property that it owns, it could attempt to avert foreclosure by filing a bankruptcy petition that might have the effect of interrupting monthly payments for an indefinite period on all of the related mortgage loans due to administrative delays or in the event of substantive consolidation of the debtors.  See Annex A-1 to this prospectus supplement for mortgage loans with related borrowers.
 
Risks Relating to Property Type Concentration
 
A concentration of mortgage loans secured by the same mortgaged property types can increase the risk that a decline in a particular industry or business would have a disproportionately large impact on the pool of mortgage loans.
 
The following are certain property type concentrations of the pool of mortgage loans as of the cut-off date (based on the allocated loan amount):
 
 Twenty-one (21) retail properties representing 52.8% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Sixteen (16) office properties representing 15.2% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Eleven (11) multifamily properties representing 11.6% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Eight (8) manufactured housing community properties representing 7.8% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Five (5) hospitality properties representing 5.3% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Two (2) mixed use properties representing 3.7% of the outstanding pool balance as of the cut-off date by allocated loan amount;
 
 Three (3) industrial properties representing 2.3% of the outstanding pool balance as of the cut-off date by allocated loan amount; and
 
 One (1) property of another type (a leased fee property operated as a retail property), representing 1.4% of the outstanding pool balance as of the cut-off date by allocated loan amount.

 
S-49

 
 
Geographic Concentration Exposes Investors to Greater Risk of Default and Loss
 
As of the cut-off date, the mortgaged properties are located in 17 states and Puerto Rico.
 
The table below shows the number of mortgaged properties, the aggregate cut-off date balance of the related mortgage loans, and the percentage of initial outstanding pool balance secured by mortgaged properties that are located in the top jurisdictions that have concentrations of mortgaged properties of 5.0% or more (based on allocated loan amount as a percentage of the initial outstanding pool balance) as of the cut-off date:
 
State/Location
 
Number of
Mortgaged
Properties
 
Aggregate Cut-off
Date Balance
 
% of Initial
Outstanding
Pool
Balance(1)
California
 6  $125,262,187  13.3% 
Massachusetts 2  $110,779,556  11.8% 
Texas
 17  $106,226,989  11.3% 
New York
 4  $105,145,654  11.2% 
Pennsylvania
 3  $74,947,427  8.0% 
North Carolina 2  $65,783,085  7.0% 
Puerto Rico
 4  $57,750,000  6.1% 
Indiana
 7  $57,249,147  6.1% 
Florida
 5  $56,999,272  6.1% 
Georgia
 1  $54,888,798  5.8% 
 

 
(1)Because this table presents information related to the mortgaged properties and not the mortgage loans, the information for any mortgaged property that relates to a mortgage loan secured by more than one mortgaged property is based on allocated loan amounts (which amounts, if not specified in the related mortgage loan document, are based on the appraised valued and/or square footage of each mortgaged property and/or each mortgaged property’s underwritten net cash flow).
 
See the table entitled “Mortgaged Properties by State and/or Location” in Annex A-2 to this prospectus supplement.  Also for certain legal aspects of mortgage loans secured by mortgaged properties located in California, Massachusetts, Texas, New York and Puerto Rico, see “Legal Aspects of Mortgage Loans in California, Massachusetts, Texas, New York and Puerto Rico” in this prospectus supplement.  Except as set forth in the chart above, no state contains more than 2.4% of the mortgaged properties (based on the principal balance as of the cut-off date of the related mortgage loans or, in the case of mortgage loans secured by multiple mortgaged properties, on the portion of principal amount of the related mortgage loan allocated to such mortgaged property).
 
Repayments by borrowers and the market value of the related mortgaged properties could be affected by economic conditions generally or specific to geographic areas or regions of the United States, and concentrations of mortgaged properties in particular geographic areas may increase the risk that adverse economic or other developments or natural disasters affecting a particular region of the country could increase the frequency and severity of losses on mortgage loans secured by those properties.  In recent periods, several regions of the United States have experienced significant real estate downturns. Regional economic declines or conditions in regional real estate markets could adversely affect the income from, and market value of, the mortgaged properties.  In addition, particular local or regional economies may be adversely affected to a greater degree than other areas of the country by developments affecting industries concentrated in such area.  A decline in the general economic condition in the region in which mortgaged properties securing the related mortgage loans are located would result in a decrease in consumer demand in the region, and the income from and market value of the mortgaged properties may be adversely affected.
 
Several mortgaged properties are located in areas that, based on low population density, poor economic demographics (such as higher than average unemployment rates, lower than average annual household income and/or overall loss of jobs) and/or negative trends in such regard, would be considered secondary or tertiary markets.
 
Other regional factors – e.g., earthquakes, floods, forest fires or hurricanes or changes in governmental rules or fiscal policies – also may adversely affect the mortgaged properties.  For example,
 
 
S-50

 
 
properties located in California, Florida, Georgia, Louisiana, North Carolina, Alaska and Texas may be more susceptible to certain hazards (such as earthquakes, floods or hurricanes) than properties in other parts of the country and mortgaged properties located in coastal states, including, but not limited to, Florida, Georgia, Louisiana, North Carolina and Texas, also may be more generally susceptible to hurricanes, tornados and other windstorms than properties in other parts of the country.  Recent hurricanes in the Gulf Coast region and in Florida have resulted in severe property damage as a result of the winds and the associated flooding.  Some of the mortgaged properties may be located in areas more susceptible to these natural disasters.  The loan documents for the mortgage loans generally do not require flood insurance on the related mortgaged properties unless such mortgaged property is located in a flood zone and flood insurance is available.  Even if the mortgaged property is located in a flood zone and flood insurance is obtained, we cannot assure you that the flood insurance will be adequate to cover the loss.  Moreover, we cannot assure you that hurricane damage would be covered by insurance.  In addition, events such as the oil platform explosion and subsequent oil spill that occurred in the Gulf of Mexico in April 2010 led to regional economic downturn for the Gulf Coast of the United States, and had an adverse impact on mortgaged properties located in nearby states, including Florida, Louisiana and Texas.  Regional areas affected by such events often experience disruptions in travel, transportation and tourism, loss of jobs and an overall decrease in consumer activity, and often a decline in real estate-related investments.  There can be no assurance that the economies in such impacted areas will recover sufficiently to support income producing real estate at pre-event levels or that the costs of the related clean-up will not have a material adverse effect on the local or national economy.
 
In addition, certain cities, states or regions of the country are currently facing or may face a depressed real estate market, which is not due to any natural disaster, but which may cause an overall decline in property values.  Certain of the mortgaged properties are located in such cities, states and regions of the country.
 
Certain Mortgage Loans Were Not Specifically Originated for Securitization
 
The mortgage loan securing the portfolio of mortgaged properties identified as Hartman Portfolio on Annex A-1 to this prospectus supplement, representing approximately 6.0% of the outstanding pool balance as of the cut-off date, was originated by J.P. Morgan Investment Management Inc. in September 2008 and acquired by German American Capital Corporation in June 2011.  This mortgage loan was not originated specifically for securitization, and therefore it lacks certain provisions that have become customary in mortgage loans that are originated for securitization.  For example:
 
 The mortgage loan does not have any lockboxes or cash management;
 
 The mortgage loan does not currently have any money in escrow or currently require any amounts in escrow and, other than with respect to escrows for taxes and insurance, does not permit the lender to require escrows;
 
 The mortgage loan is currently prepayable;
 
 The related loan documents provide for a payment default grace period of five business days;
 
 The related borrower does not have an independent director in its structure and did not deliver a non-consolidation opinion at loan origination;
 
 The related loan documents permit the related borrower to prepay on a date other than a due date and do not require the payment of interest to the next due date; to address any potential prepayment interest shortfalls that could arise as a result of such prepayments, German American Capital Corporation has agreed to reimburse the trust for such shortfall;
 
 The mortgage loan generally has weaker reporting requirements than typically required in mortgage loans originated for securitization; and
 
 
S-51

 
 
 The related loan documents have more limited borrower representations, warranties and covenants than typically included in mortgage loans originated for securitization.
 
See also “—Seasoned Mortgage Loans Present Additional Risks of Repayment” in this prospectus supplement.  In addition, the mortgage loan does not satisfy all of German American Capital Corporation’s underwriting standards.  See “Description of the Mortgage Pool—Certain Underwriting Matters—Certain Variances from Underwriting Standards” in this prospectus supplement.
 
Seasoned Mortgage Loans Present Additional Risks of Repayment
 
The mortgage loan identified as Hartman Portfolio on Annex A-1 to this prospectus supplement, representing approximately 6.0% of the outstanding pool balance as of the cut-off date, is a seasoned mortgage loan that was originated 41 months prior to the cut-off date.  There are a number of risks associated with seasoned mortgage loans that are not present, or are present to a lesser degree, with more recently originated mortgage loans.  For example:
 
 property values and the surrounding areas have likely changed since origination;
 
 origination standards at the time the mortgage loan were originated were different than current origination standards;
 
 the business circumstances and financial condition of the related borrowers and tenants may have changed since the mortgage loans were originated;
 
 the environmental circumstances at the mortgaged properties may have changed since the mortgage loans were originated;
 
 the physical condition of the mortgaged properties or improvements may have changed since origination; and
 
 the circumstances of the mortgaged properties, the borrowers and the tenants may have changed in other respects since origination.
 
See also “—Certain Mortgage Loans Were Not Specifically Originated for Securitization” in this prospectus supplement.  In addition, the mortgage loan does not satisfy all of German American Capital Corporation’s underwriting standards.  See “Description of the Mortgage Pool—Certain Underwriting Matters—Certain Variances from Underwriting Standards” in this prospectus supplement.
 
Retail Properties Have Special Risks
 
There are 21 mortgaged properties (excluding the leased fee property) that are retail properties securing 52.8% of pool by allocated loan amount.  One (1) of these mortgaged properties, representing security for 1.2% of the outstanding pool balance as of the cut-off date, is a single tenant property.  For a list of leased fee properties operated as retail businesses, see Annex A-1 to this prospectus supplement.  The value of retail properties is significantly affected by the quality of the tenants as well as fundamental aspects of real estate, such as location and market demographics.  The correlation between success of tenant business and a retail property’s value may be more direct with respect to retail properties than other types of commercial property because a component of the total rent paid by certain retail tenants is often tied to a percentage of gross sales.
 
The Presence or Absence of an “Anchor Tenant” May Adversely Affect the Economic Performance of a Retail Property
 
Whether a retail property is “anchored,” “shadow anchored” or “unanchored” is also an important consideration.  The presence or absence of an “anchor tenant” or a “shadow anchor tenant” in or near a retail property also can be important, because anchors play a key role in generating customer traffic and making a center desirable for other tenants.  An “anchor tenant” is usually proportionately larger in size
 
 
S-52

 
 
than most other tenants in the mortgaged property, is vital in attracting customers to a retail property and is located on the related mortgaged property.  Many of the retail properties securing one or more of the mortgage loans also have shadow anchor tenants.  A “shadow anchor tenant” is usually proportionally larger in size than most tenants in the mortgaged property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the mortgaged property so as to influence and attract potential customers, but not on the mortgaged property.  The economic performance of an anchored or shadow anchored retail property will consequently be adversely affected by:
 
 an anchor tenant’s or shadow anchor tenant’s failure to renew its lease or termination of an anchor tenant’s or shadow anchor tenant’s lease;
 
 if the anchor tenant or shadow anchor tenant owns its own site, a decision to vacate;
 
 the bankruptcy or economic decline of an anchor tenant, shadow anchor tenant or self-owned anchor; or
 
 the cessation of the business of an anchor tenant, a shadow anchor tenant or of a self-owned anchor (notwithstanding its continued payment of rent).
 
Eighteen (18) of the subject retail mortgaged properties, securing mortgage loans representing approximately 50.9% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, are retail properties that are considered by the applicable sponsor to have an “anchor tenant” or are leased to a single tenant. Of the 18 anchored retail properties, 1 such property (excluding the leased fee properties), securing a mortgage loan representing approximately 1.2% of the aggregate principal balance of the pool of mortgage loans as of the cut-off date, is leased to a single retail tenant.
 
In certain instances with respect to the mortgaged properties, anchor tenant leases may expire during the term of the related mortgage loan.  We cannot assure you that if anchor tenants or shadow anchor tenants at a particular mortgaged property were to close or remain vacant, such anchor tenants or shadow anchor tenants, as applicable, would be replaced in a timely manner or, if part of the collateral for the related mortgage loan, without incurring material additional costs to the related borrower and resulting in adverse economic effects.  In addition, an anchor tenant or shadow anchor tenant lease that expires near, including within a relatively short period following, the maturity date of a mortgage loan may make it more difficult for the borrower to obtain refinancing of the related mortgage loan and may thereby jeopardize repayment of the mortgage loan.
 
In addition, various anchor parcels and/or anchor improvements at a mortgaged property may be owned by the anchor tenant (or an affiliate of the anchor tenant) or by a third party and therefore not be part of the related mortgaged property and the related borrower may not receive rental income from such anchor tenant.
 
Retail properties that have anchor tenant-owned stores often have reciprocal easement and operating agreements (each, an “REA”) between the retail property owner and such anchor tenants that contain certain operating and maintenance covenants.  Although an anchor tenant that owns its own parcel does not pay rent, it generally is required to pay a contribution toward common area maintenance and real estate taxes on the improvements and related real property.  Anchor tenants that lease their stores often have operating covenants as well.  Such operating covenants may be provided for in the anchor tenant lease or in the REA, if any, affecting the mortgaged property.  Anchor tenants that have no operating covenants or whose covenants have expired previously or will expire during the terms of the related mortgage loan (as is the case with several retail tenants at mortgaged properties securing mortgage loans in the mortgage pool) are or will not be contractually obligated to operate their stores at the applicable mortgaged property.  Several retail mortgaged properties that secure mortgage loans in the pool have tenants permitted to cease operations at the related mortgaged property prior to lease termination (i.e., “go dark”), provided such tenant continues to pay rent.
 
 
S-53

 
 
For example, in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as BJ’s Wholesale Pittsfield, which secures a mortgage loan representing 1.2% of the outstanding pool balance as of the cut-off date, the sole tenant at the mortgaged property is permitted to cease operations there so long as it continues to pay rent.
 
A number of the tenant leases and REAs at the retail mortgaged properties have co-tenancy clauses which permit the applicable tenants to abate the rent payable, cease operating and/or terminate their leases if certain other tenants (in particular, anchor tenants) cease operations at the related mortgaged property and/or if a specified percentage of the stores at the related mortgaged property are not occupied and operating and also have certain other termination rights related to sales targets.  Certain of the operating covenants with respect to the mortgaged properties have expired or will expire prior to the maturity date of the related mortgage loan.  We cannot assure you that operating covenants will be obtained in the future for these or any of the tenants.
 
Certain anchor tenant and tenant estoppels obtained in connection with the origination of the mortgage loans identify disputes between the related borrower and the applicable tenant, or alleged defaults or potential defaults by the applicable property owner under the lease or REA.  Such disputes, defaults or potential defaults, could lead to a set off of rent, to a termination or attempted termination of the applicable lease or REA by the tenant or to litigation against the related borrower.  There can be no assurance that the identified tenant disputes will not have a material adverse effect on the ability of the related borrowers to repay their portion of the mortgage loan.  In addition, there can be no assurance that the tenant estoppels obtained identify all potential disputes that may arise with tenants.
 
Current Levels of Property Income May Not Be Maintained Due to Varying Tenant Occupancy
 
Rental payments from tenants of retail properties typically comprise the largest portion of the net operating income of those mortgaged properties.  Certain tenants at the retail mortgaged properties may be paying rent but are not yet in occupancy or have signed leases but have not yet started paying rent and/or not yet in occupancy.
 
Certain tenants currently may be in a rent abatement period.  There can be no assurance that such tenants will be in a position to pay full rent when the abatement period expires.  Risks applicable to anchor tenants (such as bankruptcy, failure to renew leases, early terminations of leases and vacancies) also apply to other tenants.  We cannot assure you that the rate of occupancy at the stores will remain at the current levels or that the net operating income contributed by the mortgaged properties will remain at its current or past levels.
 
Competition May Adversely Affect the Performance of the Mortgaged Property
 
Borrowers, affiliates of borrowers, and property managers of mortgaged properties may currently own, and in the future property managers of mortgaged properties and affiliates of borrowers may develop or acquire, additional properties and lease space in other properties in the same market areas where the mortgaged properties are located.  Property managers at the related mortgaged properties also may manage competing properties, including, without limitation, properties that may be situated adjacent to the mortgaged properties.  None of the property managers or any other party has any duty to favor the leasing of space in the mortgaged properties over the leasing of space in other properties, one or more of which may be adjacent to, or near, the mortgaged properties.
 
Retail properties also face competition from sources outside a given real estate market.  For example, all of the following compete with more traditional retail properties for consumer business:
 
 factory outlet centers;
 
 discount shopping centers and clubs;
 
 video shopping networks;
 
 catalogue retailers;
 
 
S-54

 
 
 home shopping networks;
 
 direct mail;
 
 internet websites; and
 
 telemarketers.
 
Continued growth of these alternative retail outlets (which often have lower operating costs) could adversely affect the rents collectible at the retail properties included in the mortgage pool, as well as the income from, and market value of, the mortgaged properties.  Moreover, additional competing retail properties have been and may in the future be built in the areas where the retail properties are located.  Such competition could adversely affect the performance of the related mortgage loan and adversely affect distributions to certificateholders.
 
In addition, although renovations and expansion at a mortgaged property will generally enhance the value of the mortgaged property over time, in the short term, construction and renovation work at a mortgaged property may negatively impact net operating income as customers may be deterred from shopping at or near a construction site.
 
Certain Risks of Restaurant Tenants
 
The mortgaged properties identified as Brea Plaza Shopping Center, Piatt Place, BB&T Headquarters Building (an office property), Rancho Penasquitos Towne Center I, Manati Centro Plaza, Fingerlakes Crossing Shopping Center, University Plaza, Addison Place North, Walzem Plaza and One Mason Plaza on Annex A-1 to this prospectus supplement, securing approximately 4.6%, 3.6%, 1.6%, 1.5%, 1.5%, 1.1%, 0.7%, 0.7%, 0.6% and 0.5% (by allocated loan amount), respectively, of the outstanding pool balance as of the cut-off date, include significant restaurant tenants, which tenants represent, in each case, one or more of the five largest tenants at the related mortgaged property and are listed on Annex A-1 to this prospectus supplement.  Certain other mortgaged properties may have smaller restaurant tenants.  Restaurants are subject to certain unique risks including that restaurant space is not easily convertible to other types of retail space (or office space, if applicable) and that restaurant receipts are not only affected by objective factors but by subjective factors.  For instance, restaurant receipts are affected by such varied influences as the current personal income levels in the community, an individual consumer’s preference for type of food, style of dining and restaurant atmosphere, the perceived popularity of a restaurant, food safety concerns related to personal health or the handling of food items at the restaurant or by food suppliers and the actions/behaviors of staff and management and level of service to the customers.  For information regarding the risks associated with office properties, see “—Office Properties Have Special Risks” in this prospectus supplement.
 
Certain Risks of Health Club or Exercise Studio Space Tenants
 
The mortgaged properties identified as Square One Mall, Vernola Marketplace, Juncos Plaza and Northcross & Victoria on Annex A-1 to this prospectus supplement, securing approximately 10.6%, 2.5%, 1.5% and 0.8% (by allocated loan amount), respectively, of the outstanding pool balance as of the cut-off date, include a significant health club or exercise studio tenant at the related mortgaged property, which tenants are listed on Annex A-1 to this prospectus supplement.  Certain other mortgaged properties may have smaller health club, exercise studio or similar tenants.  Several factors may adversely affect the value and successful operation of a health club or exercise studio, including:
 
 
the physical attributes of the property (e.g., its age, appearance and layout);
 
 the reputation, safety, convenience and attractiveness of the property to users;
 
 the quality and philosophy of management;
 
 management’s ability to control membership growth and attrition;
 
 
S-55

 
 
 competition in the tenant’s marketplace from other health clubs and alternatives to health clubs; and
 
 
adverse changes in economic and social conditions and demographic changes (e.g., population decreases or changes in average age or income), which may result in decreased demand.
 
In addition, there may be significant costs associated with changing consumer preferences (e.g., multi-purpose clubs from single-purpose clubs or varieties of equipment, classes, services and amenities).  In addition, health clubs and exercise studios may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason.  The liquidation value of any such health club consequently may be less than would be the case if the property were readily adaptable to changing consumer preferences for other uses.
 
Certain Risks of Movie Theater Tenants
 
The mortgaged properties identified as Union Square Retail, Alamance Crossing, Brea Plaza Shopping Center, Susquehanna Valley Mall, Montebello Town Square and Plaza del Sol on Annex A-1 to this prospectus supplement, securing approximately 8.0%, 5.4%, 4.6%, 3.0%, 1.7% and 1.7% (by allocated loan amount), respectively, of the outstanding pool balance as of the cut-off date include significant movie theater tenants, which tenants are listed on Annex A-1 to this prospectus supplement.
 
Properties with movie theater tenants are exposed to unique risks.  Aspects of building site design and adaptability affect the value of a theater and make it difficult to easily convert to another use.  In addition, decreasing attendance at a theater could adversely affect revenue of the theater, which may, in turn, cause the tenant to experience financial difficulties, resulting in downgrades in their tenant ratings, if applicable, and in certain cases, bankruptcy filings.  See “—Tenant Bankruptcy Entails Risks” above.
 
Office Properties Have Special Risks
 
There are 16 office properties, securing approximately 15.2% of the outstanding pool balance as of the cut-off date by allocated loan amount.
 
Various factors may adversely affect the value of office properties, including:
 
 the quality of an office building’s tenants;
 
 the quality of property management;
 
 provisions in tenant leases that may include early termination provisions;
 
 an economic decline in the business operated by the tenants;
 
 the diversity of an office building’s tenants (or reliance on a single or dominant tenant);
 
 
the physical attributes of the building in relation to competing buildings (e.g., age, condition, design, location, access to transportation and ability to offer certain amenities, including, without limitation, current business wiring requirements);
 
 the desirability of the area as a business location;
 
 the strength and nature of the local economy (including labor costs and quality, tax environment and quality of life for employees); and
 
 an adverse change in population, patterns of telecommuting or sharing of office space, and employment growth (which creates demand for office space).
 
 
S-56

 
 
Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of property.
 
Certain of the office properties are occupied by tenants that utilize the mortgaged property as medical offices, some of which offices perform out-patient medical procedures.  The performance of a medical office property may depend on the proximity of such property to a hospital or other healthcare establishment and on reimbursements for patient fees from private or government-sponsored insurance companies.  The sudden closure of a nearby hospital may adversely affect the value of a medical office property.  In addition, the performance of a medical office property may depend on reimbursements to tenants for patient fees from private or government-sponsored insurers and issues related to reimbursement (ranging from non-payment delays in payment) from such insurers could adversely impact cash flow at such mortgaged properties.  Moreover, medical office properties appeal to a narrow market of tenants and the value of a medical office property may be adversely affected by the availability of competing medical office properties.
 
Certain of the office properties utilize all or a portion of the mortgaged property as a data center.  Data center properties may not be readily convertible (or convertible at all) to alternative uses if those properties were to become unprofitable, or if the leased spaces were to become vacant, for any reason.  See “—Some Mortgaged Properties May Not Be Readily Convertible to Alternative Uses” in this prospectus supplement.
 
Certain of the office properties are occupied by one or more tenants that utilize a portion of the mortgaged property as a restaurant.  For information regarding certain risks associated with restaurant tenants, see “—Retail Properties Have Special Risks—Certain Risks of Restaurant Tenants” in this prospectus supplement.
 
If one or more major tenants at a particular office property were to close or remain vacant, we cannot assure you that such tenants would be replaced in a timely manner or without incurring material additional costs to the related borrower and resulting in adverse economic effects.
 
Multifamily Properties Have Special Risks
 
There are 11 multifamily properties, securing approximately 11.6% of the outstanding pool balance as of the cut-off date.
 
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 (e.g., its age, appearance and construction quality);
 
 the quality of property management;
 
 
the location of the property (e.g., a change in the neighborhood over time or increased crime in the neighborhood);
 
 the ability of management to provide adequate maintenance and insurance;
 
 the types of services the property provides;
 
 the property’s reputation;
 
 the level of mortgage interest rates (which may encourage tenants to purchase rather than rent housing);
 
 the generally short terms of residential leases and the need for continued reletting;
 
 
S-57

 
 
 rent concessions and month-to-month leases, which may impact cash flow at the property;
 
 in the case of student housing facilities, which may be more susceptible to damage or wear and tear than other types of multifamily housing, the reliance on the financial well-being of the college or university to which it relates, competition from on-campus housing units, which may adversely affect occupancy, the physical layout of the housing, which may not be readily convertible to traditional multifamily use, and that student tenants have a higher turnover rate than other types of multifamily tenants, which in certain cases is compounded by the fact that student leases are available for periods of less than 12 months;
 
 restrictions on the age of tenants who may reside at the property, thereby limiting the pool of potential tenants;
 
 the presence of competing properties and residential developments in the local market;
 
 the existence of corporate tenants renting large blocks of units at the property, which in the event such tenant vacates would leave the property with a significant percentage of unoccupied space, and in the event such tenant was renting at an above-market rent may make finding replacement tenants difficult;
 
 the tenant mix, particularly if the tenants are predominantly students, personnel from or workers related to a military base or workers from a particular business or industry;
 
 adverse local, regional or national economic conditions, which may limit the amount of rent that can be charged and may result in a reduction in timely rent payments or a reduction in occupancy;
 
 state and local regulations;
 
 government assistance/rent subsidy programs; and
 
 national, state or local politics.
 
State Regulations and Government Subsidies May Affect a Borrower’s Ability To Repay a Multifamily Mortgage Loan
 
Certain states regulate the relationship of an owner and its tenants.  Commonly, these laws require a written lease, good cause for eviction, disclosure of fees, and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions, and restrictions on a resident’s choice of unit vendors.  Apartment building owners have been the subject of suits under state “Unfair and Deceptive Practices Acts” and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices.  A few states offer more significant protection.  For example, there are provisions that limit the basis on which a landlord may terminate a tenancy or increase its rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner’s building.
 
In addition to state regulation of the landlord-tenant relationship, numerous counties and municipalities, including those in which certain of the mortgaged properties are located, impose rent control on apartment buildings.  These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration.  In many cases, the rent control laws do not permit vacancy decontrol.  Local authorities may not be able to impose rent control because it is pre-empted by state law in certain states, and rent control is not imposed at the state level in those states.  In some states, however, local rent control ordinances are not pre-empted for tenants having short-term or month-to-month leases, and properties there may be subject to various forms of rent control with respect to those tenants.  Any limitations on a borrower’s ability to raise property rents may impair such borrower’s ability to repay its multifamily mortgage loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property.
 
 
S-58

 
 
Certain of the mortgage loans may be secured now or in the future by mortgaged properties that are eligible for and have received low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code of 1986, as amended, in respect of various units within the property or have tenants that rely on rent subsidies under various government-funded programs, including the Section 8 Tenant-Based Assistance Rental Certificate Program of the U.S. Department of Housing and Urban Development.  The depositor gives no assurance that such programs will be continued in their present form or that the level of assistance provided will be sufficient to generate enough revenues for the related borrower to meet its obligations under the related mortgage loan.  See “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Mortgage Loans Subject to Government Assistance Programs” in this prospectus supplement.
 
Manufactured Housing Community Properties Have Special Risks
 
There are 8 manufactured housing community properties, securing approximately 7.8% of the outstanding pool balance as of the cut-off date.  Mortgage loans secured by liens on manufactured housing community properties pose risks not associated with mortgage loans secured by liens on other types of income-producing real estate.
 
The successful operation of a manufactured housing property may depend upon the number of other competing residential developments in the local market, such as:
 
 other manufactured housing community 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;
 
 the location of the manufactured housing property;
 
 the ability of management to provide adequate maintenance and insurance;
 
 the type of services or amenities it provides;
 
 the property’s reputation;
 
 restrictions on the age of tenants that may reside at the property; and
 
 state and local regulations, including rent control and rent stabilization.
 
Some of the manufactured housing community mortgaged properties require that residents be 55 years of age or older, thereby limiting the potential tenant pool.  The manufactured housing community properties are “special purpose” properties that could not be readily converted to general residential, retail or office use.  Thus, if the operation of any of the manufactured housing community properties becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that manufactured housing property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the manufactured housing community property were readily adaptable to other uses.
 
Hospitality Properties Have Special Risks
 
There are 5 hospitality properties, securing approximately 5.3% of the outstanding pool balance as of the cut-off date.  One (1) hospitality property, securing approximately 1.8% of the outstanding pool
 
 
S-59

 
 
balance as of the cut-off date, is considered full service.  Four (4) hospitality properties, securing approximately 3.5% of the outstanding pool balance as of the cut-off date, are considered limited service.
 
Various factors may adversely affect the economic performance of a hospitality property, including:
 
 adverse economic and social conditions, either local, regional or national (which may limit the amount that can be charged per room and reduce occupancy levels);
 
 poor property management;
 
 the construction of competing hotels or resorts;
 
 continuing expenditures for modernizing, refurbishing and maintaining existing facilities prior to the expiration of their anticipated useful lives;
 
 conversion to alternative uses which may not be readily made;
 
 a deterioration in the financial strength or managerial capabilities of the owner and operator of a hospitality property;
 
 changes in travel patterns caused by general adverse economic conditions, fear of terrorist attacks, adverse weather conditions and changes in access, energy prices, travel costs, strikes, relocation of highways, the construction of additional highways or other factors;
 
 management ability of property managers and/or whether management contracts or franchise agreements are renewed or extended upon expiration;
 
 desirability of particular locations;
 
 location, quality and management company’s affiliation, each of which affects the economic performance of a hospitality property; and
 
 relative illiquidity of hospitality property investments which limits the ability of the borrowers and property managers to respond to changes in economic or other conditions.
 
Because hotel rooms generally are rented for short periods of time, the financial performance of hospitality properties tends to be affected by adverse economic conditions and competition more quickly than other commercial properties.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Comfort Inn JFK at Ozone Park, which secures a mortgage loan representing 1.0% of the outstanding pool balance as of the cut-off date, a new 36-room Days Inn Hotel is being constructed in the lot adjacent to the property.  In addition, in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Hampton Inn & Suites, which secures a mortgage loan representing 0.8% of the outstanding pool balance as of the cut-off date, a new 75-room Candlewood Suites Hotel is being constructed in the subject property’s market area.
 
The Seasonality of Business May Create Shortfalls in Hospitality Revenue
 
The hospitality and lodging industry is generally seasonal in nature and different seasons affect different hospitality properties 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.  There can be no assurance that cash flow will be sufficient to offset any shortfalls that occur at the mortgaged property during slower periods or that the related mortgage loans provide for seasonality reserves, or if seasonality reserves are provided for, that such reserves will be funded or will be sufficient or available to fund such shortfalls.
 
 
S-60

 
 
The Inability to Maintain a Liquor License May Adversely Impact Hospitality Revenue
 
The liquor licenses for most of the applicable mortgaged properties are commonly held by affiliates of the mortgagors, unaffiliated managers or operating lessees.  The laws and regulations relating to liquor licenses generally prohibit the transfer of such licenses.  In the event of a foreclosure of a hospitality property that holds a liquor license, a purchaser in a foreclosure sale would likely have to apply for a new license, which might not be granted or might be granted only after a delay which could be significant.  There can be no assurance that a new license could be obtained promptly or at all.  The lack of a liquor license in a full-service hospitality property could have an adverse impact on the revenue from the related mortgaged property or on the hotel’s occupancy rate.
 
The Performance of a Hospitality Property Depends in Part on the Performance of Its Management Company
 
Three (3) of the hospitality properties, securing approximately 2.7% of the outstanding pool balance as of the cut-off date, are affiliated with a franchise or hotel management company through a franchise or management agreement.  A hospitality property subject to a franchise, management or marketing agreement is typically required by the hotel chain or management company to maintain certain standards and satisfy certain criteria or risk termination of its affiliation.
 
The mortgaged property identified on Annex A-1 to this prospectus supplement as Comfort Inn JFK at Ozone Park, which secures a mortgage loan representing 1.0% of the outstanding pool balance as of the cut-off date, is operated under a 20-year franchise agreement with Choice Hotels that is scheduled to expire on December 25, 2029.  However, the franchise agreement provides for termination rights on the part of the franchisor (upon twelve (12) months’ prior notice) and the franchisee (upon six (6) months’ prior notice) on the fifth, tenth and fifteenth anniversaries during the term of the franchise agreement.
 
The performance of a hospitality property affiliated with a franchise or hotel management company or managed by a hotel management company depends in part on:
 
 ��the continued existence, reputation, and financial strength of the franchisor or hotel management company;
 
 the public perception of the franchise or management company or hotel chain service mark; and
 
 the duration of the franchise licensing agreement or management agreement.
 
Any provision in a franchise agreement providing for termination because of the bankruptcy of a franchisor generally will not be enforceable.  Replacement franchises may require significantly higher fees.
 
Transferability of franchise license agreements is generally 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.
 
No assurance can be given that a franchise or management agreement will not be terminated during the term of the related mortgage loan or that the issuing entity could renew a franchise or management agreement or obtain a new franchise or management agreement following termination of the agreement in place at the time of foreclosure.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Hampton Inn & Suites, which secures a mortgage loan representing 0.8% of the outstanding pool balance as of the cut-off date, Hilton Worldwide has instituted a property improvement plan for the property, the major items of which relate to lobby renovations.  Failure to complete the plan could adversely affect the status of the franchise arrangement.  In addition, there can be no assurance that room rentals will not be adversely affected while the renovations are ongoing.
 
 
S-61

 
 
The hospitality properties identified on Annex A-1 to this prospectus supplement as Healdsburg Hotel and Hotel Provincial, which secure a mortgage loans that represents 1.8% and 0.7%, respectively, of the initial outstanding pool balance, are unflagged hotels.  Accordingly, they lack the benefits of a strong franchise affiliation.
 
Industrial Properties Have Special Risks
 
There are 3 industrial properties, securing approximately 2.3% of the outstanding pool balance as of the cut-off date by allocated loan amount.  Significant factors determining the value of industrial properties are:
 
 the quality of tenants;
 
 reduced demand for industrial space because of a decline in a particular industry segment;
 
 the property becoming functionally obsolete;
 
 building design and adaptability;
 
 unavailability of labor sources;
 
 changes in access, energy prices, strikes, relocation of highways, the construction of additional highways or other factors;
 
 changes in proximity of supply sources;
 
 the expenses of converting a previously adapted space to general use; 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 often are dependent on a single or a few tenants.
 
Industrial properties may be adversely affected by reduced demand for industrial space occasioned by a decline in a particular industry segment (for example, a decline in defense spending), and a particular industrial property that suited the needs of its original tenant may be difficult to re-let to another tenant or may become functionally obsolete relative to newer properties.  Furthermore, lease terms with respect to industrial properties are generally for shorter periods of time and may result in a substantial percentage of leases expiring in the same year at any particular industrial property.  In addition, industrial properties are often more prone to environmental concerns due to the nature of items being stored or type of work conducted at the property.
 
Aspects of building site design and adaptability affect the value of an industrial property.  Site characteristics which are generally desirable to an industrial property include high, clear ceiling heights, wide column spacing, a large number of bays (loading docks) and large bay depths, divisibility, minimum large truck turning radii and overall functionality and accessibility.  Location is also important because an industrial property requires the availability of labor sources, proximity to supply sources and customers and accessibility to rail lines, major roadways and other distribution channels.  Because of the construction utilized in connection with certain industrial facilities, it might be difficult or costly to convert such a facility to an alternative use.
 
Risks Related to Loans Secured by Mortgaged Properties Located in Puerto Rico
 
One (1) mortgage loan, representing 6.1% of the outstanding pool balance as of the cut-off date, is secured by a portfolio of mortgaged real properties located in Puerto Rico and identified on Annex A-1 to this prospectus supplement as Puerto Rico Retail Portfolio.
 
 
S-62

 
 
Currently, Puerto Rico does not impose income or withholding tax on interest received on loans by foreign (non-Puerto Rico) entities not engaged in trade or business in Puerto Rico, as long as the foreign (non-Puerto Rico) entity receiving the interest payment and the debtor making the interest payment are not related, or if the interest payment is not from sources within Puerto Rico (i.e., when the entity making the interest payment is not a resident of Puerto Rico).  The related mortgage loan seller has been advised that Puerto Rico law would not impose income or withholding tax on interest received on the Puerto Rico Retail Portfolio mortgage loan while it is held by the issuing entity; however, no assurance can be given that the law will not change in the future.  If an income or withholding tax were imposed on the Puerto Rico Retail Portfolio mortgage loan, the lender may not be able to collect from the related borrower any shortfall in the monthly payment resulting from such tax, because the loan does not directly address changes in law that result in an income or withholding tax. Such tax would therefore result in a shortfall to affected certificateholders.
 
Furthermore, the Commonwealth of Puerto Rico is an unincorporated territory of the United States.  The provisions of the United States Constitution and laws of the United States apply to the Commonwealth of Puerto Rico as determined by the United States Congress and the continuation or modification of current federal law and policy applicable to the Commonwealth of Puerto Rico remains within the discretion of the United States Congress.  If the Commonwealth of Puerto Rico were granted complete independence, there can be no assurance of what impact this would have on the issuing entity’s interest in the mortgaged real property located in Puerto Rico.
 
Commercial mortgage loans in Puerto Rico are generally evidenced by the execution of a promissory note in favor of the mortgagee and a “mortgage note” payable to the bearer thereof, which is then pledged to the mortgagee as security for the promissory note.  The bearer mortgage note in turn is secured by a deed of mortgage on certain real property of the borrower.  Notwithstanding the existence of both the promissory note and the bearer mortgage note, the borrower has only a single indebtedness to the mortgagee, and in the event of default the mortgagee may bring a single unitary action to proceed directly against the mortgaged property without any requirement to take any separate action under the promissory note or bearer mortgage note.  Foreclosure of a mortgage in Puerto Rico is generally accomplished by judicial action.  The action is initiated by the service of legal pleadings upon all parties having an interest in the real property.  Delays in completion of the foreclosure may occasionally result from difficulties in locating necessary parties. When the mortgagee’s right to foreclose is contested, the legal proceedings necessary to resolve the issue can be time-consuming and costly.  The costs of foreclosure would reduce the proceeds from a foreclosure sale available to satisfy the mortgage loan. In any case, there can be no assurance that the net proceeds realized from foreclosures on the mortgage, after payment of all foreclosure expenses, would be sufficient to pay the principal, interest and other expenses, if any, which are due under the mortgage loan and thus the amount of accrued and unpaid interest and unpaid principal on the certificates.  See “Legal Aspects of Mortgage Loans in California, Massachusetts, Texas, New York and Puerto Rico” in this prospectus supplement.
 
Risks of Co-Tenancy and Other Early Termination Provisions in Retail and Office Leases
 
Retail leases often, and office leases sometimes, give tenants the right to terminate the related lease or abate or reduce the related rent for various reasons or upon various conditions, including (i) if the borrower for the applicable mortgaged property allows uses at the mortgaged property in violation of use restrictions in current tenant leases, (ii) if the borrower or any of its affiliates owns other properties within a certain radius of the mortgaged property and allows uses at those properties in violation of use restrictions, (iii) if the related borrower fails to provide a designated number of parking spaces, (iv) if there is construction at or otherwise affecting access to or parking on the related mortgaged property or an adjacent property (whether or not such adjacent property is owned or controlled by the borrower or any of its affiliates) that may interfere with visibility or a tenant’s use of or access to or parking upon the mortgaged property, (v) upon casualty or condemnation with respect to all or a portion of the mortgaged property above a certain threshold or that interferes with a tenant’s use of or access to such mortgaged property or that otherwise renders such mortgaged property unsuitable for a tenant’s use or if the borrower fails to rebuild such mortgaged property within a certain time, (vi) if a tenant’s use is not permitted by zoning or applicable law, (vii) if utilities or other essential services are not provided to the
 
 
S-63

 
 
subject space for a specified period, or (viii) if the landlord defaults on its obligations under the lease.  In each identified instance the borrower may have interests adverse to the mortgagee, and we cannot assure you that the borrower will not violate those restrictions if it feels that such violation may otherwise benefit it or its affiliates to do so, even where such action is to the detriment of the mortgaged property.
 
In addition, it is common for non-anchor tenants at anchored or shadow-anchored retail centers to have the right to terminate their leases or abate or reduce rent if the anchor or shadow anchor tenant goes dark.  In addition, an anchor tenant may have a similar co-tenancy provision in its lease based on the continued operations of another anchor tenant.  Even if tenant leases do not include provisions granting such termination or rent abatement rights, because the anchor or shadow anchor tenant plays a key role in generating customer traffic and making a center desirable for other tenants, we cannot assure you that any loss of an anchor tenant will not have a material adverse impact on the non-anchor tenants’ ability to operate, which may in turn adversely impact the borrower’s ability to meet its obligations under the related mortgage loan documents.  If an anchor tenant goes dark, generally the borrower’s only remedy is to terminate that lease after the anchor tenant has been dark for a specified amount of time.
 
Certain of the tenant leases for the mortgaged properties permit the related tenant to terminate its lease and/or abate or reduce rent if the tenant fails to meet certain sales targets or other business objectives for a specified period of time.  We cannot assure you that all or any of these tenants will meet the sales targets or business objectives required to avoid any termination and/or abatement rights.
 
In addition, certain of the tenant leases for the mortgaged properties may permit the affected tenants to terminate their leases and/or abate or reduce rent if a certain number of other tenants, and/or other tenants occupying a specified percentage of the total space, cease to operate at the applicable mortgaged property.  Further, certain of the tenant leases for the other mortgaged properties may permit affected tenants to terminate their leases if a tenant at an adjacent or nearby property terminates its lease or goes dark.
 
In addition, certain of the tenant leases for the mortgaged properties may permit the affected tenants to terminate their leases or abate rent prior to the stated lease expiration date for no reason after a specified period of time following commencement of the lease and/or solely upon notice to the landlord.
 
For example, as regards the 10 largest mortgage loans or groups of cross-collateralized mortgage loans:
 
 In the case of the mortgaged properties identified on Annex A-1 to this prospectus supplement as University Plaza and Manati Centro Plaza, which (together with the other mortgaged properties comprising the Puerto Rico Retail Portfolio) secure a mortgage loan that represents 6.1% of the outstanding pool balance as of the cut-off date, Gatsby (one of the five largest tenants at each such property) has a right to terminate its lease at each such property with 180 days’ notice in April 2013 or April 2014, in the case of University Plaza, and in April 2015 or April 2016, in the case of Manati Centro Plaza.
 
 In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Brea Plaza Shopping Center, which secures a mortgage loan representing 4.6% of the outstanding pool balance as of the cut-off date, (i) the spaces to be leased by DSW and DXL-Casual Male Group are in the process of being built out, and if the landlord cannot deliver the spaces to the tenants by October 1, 2012, in the case of DSW, and June 1, 2012, in the case of DXL-Casual Male Group, such tenants may terminate their leases, (ii) even after taking occupancy DSW and DXL-Casual Male Group will each be permitted certain termination rights if certain sales targets are not met, (iii) the related borrower holds a leasehold interest in a portion of the parking area for the mortgaged property and if the related ground lease were to be terminated such that the related parking area was no longer available, several tenants would have the right to terminate their leases, (iv) a right to rent abatement in the Total Wines lease would be triggered if the Borders space (vacant since September 16, 2011 but leased to DSW and DXL-Casual Male Group and in a build-out phase) remains vacant for 270 consecutive days, and a termination right in the Total Wines lease would be triggered if the Borders space remains
 
 
S-64

 
 
  vacant for one (1) year, and (v) Bonny Bridal has a right to terminate its lease after the third year of the lease with 180 days’ notice.
 
 In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Piatt Place, which secures a mortgage loan representing 3.6% of the outstanding pool balance as of the cut-off date, the largest tenant, Commonwealth of PA - Department of General Services, has the right to terminate its lease should the Commonwealth of Pennsylvania’s budget not include funds appropriated for the payment of the scheduled rental payments for any office space of similar size in the city of Pittsburgh. However, under such scenario, the tenant is required to reimburse landlord for any unamortized TI/LC costs, as listed in the tenant’s lease, to the extent that the Commonwealth of Pennsylvania has appropriated funds for this penalty.  At loan closing, this penalty was in excess of $13.3 million, and reduces to over $8.0 million at loan maturity. The second largest tenant, University of Phoenix, has a termination provision at the end of the sixtieth month of the lease provided that it reimburses the borrower for any unamortized TI/LC costs.  The projected TI/LC costs are approximately $1.1 million.  The fifth largest tenant, Izzazu, Inc., has the right to terminate its lease following the last day of the 126th month of the lease term, by written notice at least 180 days prior, and with a lease termination payment equal to the sum of (i) $10,000 and (ii) the remaining full unamortized TI/LC and related costs.
 
Any exercise of the foregoing termination rights could result in vacant space at the related mortgaged property, renegotiation of the lease with the related tenant or re-letting of the space.  We cannot assure you that any vacated space could or would be re-let.  Furthermore, we cannot assure you that the foregoing termination and/or abatement rights will not arise in the future or materially adversely affect the related borrower’s ability to meet its obligations under the related mortgage loan documents.  See —Certain Additional Risks Related to Tenants” above.
 
Condominium Properties Have Special Risks
 
The mortgage loans identified on Annex A-1 to this prospectus supplement as 180 Peachtree Street and Alrig Portfolio, representing 5.8% and 0.7%, respectively, of the outstanding pool balance as of the cut-off date, are secured or may be secured, in whole or in part, by the related borrower’s fee simple ownership interest in one or more condominium units.
 
The management and operation of a condominium is generally controlled by a condominium board representing the owners of the individual condominium units, subject to the terms of the related condominium rules or by-laws.  Generally, the consent of a majority of the board members is required for any actions of the condominium board and a unit owner’s ability to control decisions of the board are generally related to the number of units owned by such owner as a percentage of the total number of units in the condominium.
 
With respect to the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as 180 Peachtree Street, representing 5.8% of the outstanding pool balance as of the cut-off date, the related borrower owns 65.5% of the condominium units and generally controls the condominium board.
 
The mortgaged property identified on Annex A-1 to this prospectus supplement as Willow Office Center, securing 0.2% of the outstanding pool balance as of the cut-off date by allocated loan amount and is part of the Alrig Portfolio, is one of two units comprising the subject condominium.  The related borrower is also the administrator of the condominium.  There is no condominium board.  Certain decisions are unanimously made by both unit owners (in certain circumstances with the consent of first mortgagees), while certain decisions are made by the administrator or a specific unit owner.  For example, the administrator determines what ongoing maintenance is required and assesses the appropriate amounts to the respective unit owners in order to appropriately maintain the common areas.  Although it is unclear from documentation relating to the condominium whether the right is still effective, the developer of the condominium may have a right of first option and a right of first refusal with respect to the sale by a unit owner of its unit.
 
 
S-65

 
 
The condominium board is generally responsible for administration of the affairs of the condominium, including providing for maintenance and repair of common areas, adopting rules and regulations regarding common areas, and obtaining insurance and repairing and restoring the common areas of the property after a casualty.  Notwithstanding the insurance and casualty provisions of the related mortgage loan documents, the condominium board may have the right to control the use of casualty proceeds.  In addition, the condominium board generally has the right to assess individual unit owners for their share of expenses related to the operation and maintenance of the common elements.  In the event that an owner of another unit fails to pay its allocated assessments, the related borrower may be required to pay such assessments in order to properly maintain and operate the common elements of the property.  Although the condominium board generally may obtain a lien against any unit owner for common expenses that are not paid, such lien generally is extinguished if a lender takes possession pursuant to a foreclosure.  Each unit owner is responsible for maintenance of its respective unit and retains essential operational control over its unit.
 
Certain condominium declarations and/or local laws provide for the withdrawal of a property from a condominium structure under certain circumstances.  For example, the New York Condominium Act provides for a withdrawal of the property from a condominium structure by vote of 80% of unit owners.  If the condominium is terminated, the building will be subject to an action for partition by any unit owner or lienor as if owned in common.  This could cause an early and unanticipated prepayment of the mortgage loan.  There can be no assurance the proceeds from partition will be sufficient to satisfy borrower’s obligations under the mortgage loan.
 
Due to the nature of condominiums and a borrower’s ownership interest therein, a default on a mortgage loan secured by the borrower’s interest in one or more condominium units may not allow the related lender the same flexibility in realizing upon the underlying real property as is generally available with respect to non-condominium properties.  The rights of any other unit owners, the governing documents of the owners’ association and state and local laws applicable to condominiums must be considered and respected.  Consequently, servicing and realizing upon such collateral could subject the issuing entity to greater expense and risk than servicing and realizing upon collateral for other mortgage loans that are not condominiums.
 
Risks Related to Construction, Development, Redevelopment, Renovation and Repairs at Mortgaged Properties
 
Certain of the mortgaged properties are currently undergoing, or are expected to undergo in the future, construction, development, redevelopment, renovation or repairs.
 
We cannot assure you that any current or planned construction, redevelopment, renovation or repairs will be completed, that such construction, redevelopment, renovation or repairs will be completed in the time frame contemplated, or that, when and if redevelopment or renovation is completed, such redevelopment or renovation will improve the operations at, or increase the value of, the subject property.  Failure of any of the foregoing to occur could have a material negative impact on the related mortgage loan and/or the value of the related mortgaged property, which could affect the ability of the borrower to repay the related mortgage loan.
 
In the event that the related borrower or tenant fails to pay the costs for work completed or material delivered in connection with such ongoing construction, redevelopment, renovation or repairs, the related mortgaged property may be subject to mechanic’s or materialmen’s liens that may be senior to the lien of the related mortgage loan.  The existence of construction or renovation at a mortgaged property may make such mortgaged property less attractive to tenants or their customers or other users and, accordingly, could have a negative impact on net operating income.
 
Furthermore, in the event of a foreclosure on any mortgaged property following a default on a related mortgage loan, the special servicer will generally retain an independent contractor to operate the mortgaged property.  Among other things, the independent contractor generally will not be able to perform construction work, other than repair, maintenance or certain types of tenant build-outs, unless the construction was at least 10% completed when default on the mortgage loan becomes imminent.  The
 
 
S-66

 
 
inability to complete such construction work may result in lower cash flows and less liquidation proceeds to the issuing entity than if such construction were able to be completed.
 
Options and Other Purchase Rights May Affect Value or Hinder Recovery with Respect to the Mortgaged Properties
 
The borrowers under certain mortgage loans have given to one or more tenants or another person (or the related mortgaged property may be subject to) a right of first refusal in the event a sale is contemplated, a right of first refusal to purchase a leasehold interest in the premises in the event that the sale of the borrower’s leasehold interest is contemplated, an option to purchase all or a portion of the related mortgaged property and/or various similar rights.
 
For example:
 
 in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Montebello Town Square, which secures a mortgage loan representing approximately 1.7% of the outstanding pool balance as of the cut-off date, AMC Theatres has a right of first refusal with respect to any space at the shopping center that the landlord intends to lease or sell to another movie theater tenant.
 
 
in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Rancho Penasquitos Towne Center I, which secures a mortgage loan that represents 1.5% of the outstanding pool balance as of the cut-off date, the Bank of America tenant has a right of first refusal with respect to the mortgaged property demised pursuant to its lease on the same terms and conditions offered to a third party.  Such right of first refusal will not apply to a foreclosure, deed-in-lieu of foreclosure or the first subsequent transfer following such event.
 
 in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as BB&T Headquarters Building, which secures a mortgage loan that represents 1.6% of the outstanding pool balance as of the cut-off date, Branch Banking and Trust Company, the largest tenant, has a right of first offer to purchase the property if the landlord determines in good faith to offer the property for sale.
 
 in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Johnstown Galleria—Ground Lease, which secures a mortgage loan that represents 1.4% of the outstanding pool balance as of the cut-off date, the related borrower holds a fee interest in that property and is the landlord under a ground lease of the entire property.  The tenant under the ground lease holds a right of first offer to purchase the fee interest.  However, that right of first offer does not apply to a transfer to a fee mortgagee or the purchaser at a foreclosure sale in connection with a foreclosure of the fee mortgage.
 
These rights, which may not be subordinated to the related mortgage, may impede the lender’s ability to sell the related mortgaged property at foreclosure or after acquiring the mortgaged property pursuant to foreclosure, or adversely affect the value and/or marketability of the related mortgaged property.  Additionally, the exercise of a purchase option may result in the related mortgage loan being prepaid during a period when voluntary prepayments are otherwise prohibited.
 
The Sellers of the Mortgage Loans Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans
 
In the event of the bankruptcy or insolvency of any mortgage loan seller, it is possible the issuing entity’s right to payment from or ownership of the mortgage loans could be challenged, and if such challenge were successful, delays or reductions in payments on your certificates could occur.
 
Based upon opinions of counsel that the conveyance of the mortgage loans would generally be respected in the event of bankruptcy or insolvency of the mortgage loan sellers, which opinions are subject to various assumptions and qualifications, the depositor believes that such a challenge will be
 
 
S-67

 
 
unsuccessful, but there can be no assurance that a bankruptcy trustee, if applicable, or other interested party will not attempt to assert such a position.  Even if actions seeking such results were not successful, it is possible that payments on the certificates would be delayed while a court resolves the claim.
 
Environmental Issues at the Mortgaged Properties May Adversely Affect Payments on Your Certificates
 
Certain Environmental Laws May Negatively Impact a Borrower’s Ability to Repay a Mortgage Loan
 
Various environmental laws may make a current or previous owner or operator of real property liable for the costs of removal, remediation or containment of hazardous or toxic substances on, under, in, or emanating from that property.  Those laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances.  For example, certain laws impose liability for release of asbestos containing materials into the air or require the removal or containment of the asbestos containing materials; polychlorinated biphenyls in hydraulic or electrical equipment are regulated as hazardous or toxic substances; and the U.S. Environmental Protection Agency has identified health risks associated with elevated radon gas levels in buildings.  In some states, contamination of a property may give rise to a lien on the property for payment of the costs of addressing the condition.  This lien may have priority over the lien of a pre-existing mortgage.  Additionally, third parties may seek recovery from owners or operators of real properties for personal injury or property damages associated with exposure to hazardous or toxic substances related to the properties.
 
The costs of any required remediation and the owner’s or operator’s liability for them as to any property are generally not limited under these laws, ordinances and regulations and could exceed the value of the mortgaged property and the aggregate assets of the owner or operator.  In addition, as to the owners or operators of mortgaged properties that generate hazardous substances that are disposed of at “offsite” locations, the owners or operators may be held strictly, jointly and severally liable if there are releases or threatened releases of hazardous substances at the offsite locations where that person’s hazardous substances were disposed.  Additionally, third parties may seek recovery from owners or operators of real properties for personal injury or property damages associated with exposure to hazardous or toxic substances related to the properties.
 
Federal law requires owners of certain residential housing constructed prior to 1978 to disclose to potential residents or purchasers any condition on the property that causes exposure to lead-based paint.  Contracts for the purchase and sale of an interest in residential housing constructed prior to 1978 must contain a “Lead Warning Statement” that informs the purchaser of the potential hazards to pregnant women and young children associated with exposure to lead-based paint.  The ingestion of lead-based paint chips and/or the inhalation of dust particles from lead-based paint by children can cause permanent injury, even at low levels of exposure.  Property owners may be held liable for injuries to their tenants resulting from exposure to lead-based paint under common law and various state and local laws and regulations that impose affirmative obligations on property owners of residential housing containing lead-based paint.
 
The owner’s liability for any required remediation generally is not limited by law and could accordingly exceed the value of the property and/or the aggregate assets of the owner.  The presence of hazardous or toxic substances also may adversely affect the owner’s ability to refinance the property or to sell the property to a third party.  The presence of, or strong potential for contamination by, hazardous substances consequently can have a materially adverse effect on the value of the mortgaged property and a borrower’s ability to repay its mortgage loan.
 
In addition, under certain circumstances, a lender (such as the issuing entity) could be liable for the costs of responding to an environmental hazard.  See “Certain Legal Aspects of Mortgage Loans—Environmental Considerations” in the prospectus.
 
 
S-68

 
 
A Borrower May Be Required to Take Remedial Steps with Respect to Environmental Hazards at a Property.
 
In certain cases where the environmental consultant recommended that action be taken in respect of a materially adverse or potentially material adverse environmental condition at the related mortgaged property:
 
 an environmental consultant investigated those conditions and recommended no further investigations or remedial action;
 
 a responsible third party was identified as being responsible for the remedial action; or
 
 the related originator of the subject mortgage loan generally required the related borrower to:
 
(a)         take investigative and/or remedial action;
 
(b)         carry out an operation and maintenance plan or other specific remedial action measures post-closing and/or to establish an escrow reserve in an amount sufficient for effecting that plan and/or the remedial action;
 
(c)         monitor the environmental condition and/or to carry out additional testing, in the manner and within the time frame specified by the environmental consultant;
 
(d)         obtain or seek a letter from the applicable regulatory authority stating that no further action was required;
 
(e)         obtain environmental insurance or provide an indemnity or guaranty from an individual or an entity (which may include the loan sponsor); or
 
(f)         the circumstance or condition has been remediated in all material respects.
 
See “Risk Factors—Commercial and Multifamily Loans Are Subject to Certain Risks That Could Adversely Affect the Performance of Your Offered Certificates—Environmental Issues at the Mortgaged Properties May Adversely Affect Payments on for Certificates” and “Certain Legal Aspects of Mortgage Loans—Environmental Considerations” in the prospectus.
 
Potential Issuing Entity Liability Related to a Materially Adverse Environmental Condition
 
The mortgage loan sellers have represented to the Depositor that all of the mortgaged properties have (i) had an environmental site assessment (or a database review) within the 12 months preceding the closing date of the securitization or (ii) obtained a lender’s environmental insurance policy.  The mortgage loan sellers have represented to the depositor that to the extent a Phase II environmental site assessment was recommended, such Phase II was conducted or the related mortgage loan seller obtained a lender’s environmental insurance policy.  See “Description of the Mortgage Pool—Certain Underwriting Matters—Environmental Site Assessments” in this prospectus supplement.
 
There can be no assurance that any environmental site assessment, study or review or Phase I and/or Phase II sampling revealed all possible environmental hazards or that all environmental matters that were revealed were or will be remediated or otherwise adequately addressed.  The environmental assessments relating to certain of the mortgage loans revealed the existence of various current and historical recognized environmental conditions, including friable or non-friable asbestos-containing materials, mold, lead-based paint, radon gas, leaking aboveground and/or underground storage tanks, current or historical use as a dry cleaning operation, lumber yard and gravel pit, gas station, auto repair operation and/or photo development operation, storage of large quantities of waste chemicals, polychlorinated biphenyl contamination, soil and/or ground water contamination (or potential contamination) from onsite and/or off-site sources, elevated soil vapor concentrations or other material environmental conditions.  In some cases, particularly with respect to multifamily and manufactured
 
 
S-69

 
 
housing community mortgaged properties, a property owner must disclose an environmental condition to potential tenants which may deter them from leasing the subject space.  The environmental assessments relating to certain of the mortgage loans also revealed that the related mortgaged property was located in or near a superfund site.  For information regarding environmental site assessments at the mortgaged properties, see “Description of the Mortgage Pool—Certain Underwriting Matters—Environmental Site Assessments” below.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Yorktowne MHP, which secures 1.3% of the outstanding pool balance as of the cut-off date by allocated loan amount, a Phase I environmental site assessment dated November 11, 2011 revealed soil and groundwater perchloroethylene (PCE) contamination caused by a dry cleaner that was located at the property from approximately 1970 to 2006.  Remediation is currently underway and is anticipated to take approximately two years with additional monitoring in subsequent years.  Remediation is anticipated to include (i) the installation of a vapor extraction system, (ii) a focused Phase II investigation to delineate contaminated soil for physical removal and (iii) biological remediation to accelerate the degradation of the dry cleaning solvents.  An escrow of $400,000 exists to cover the current estimate of the cost of remediation, and an additional $45,000 has been escrowed to pay for independent consultants to monitor the remediation efforts.  There can be no assurances that the escrows described above will be sufficient for the remediation or that the investigations conducted as part of the work plans will not reveal any unanticipated environmental conditions.
 
The mortgaged properties identified on Annex A-1 to this prospectus supplement as Southwood Manor MHC and Penland Park MHC, respectively, are both manufactured housing community properties located in Alaska that secure mortgage loans to affiliated borrowers, which mortgage loans represent in the aggregate 2.3% of the outstanding pool balance as of the cut-off date.  The related mortgage loans are not cross-collateralized or cross-defaulted.  Both properties depend, in whole or in part, on private wells located at the respective properties for drinking water.  In each case, that well water contains levels of arsenic that are above the maximum level permitted by current Alaska law.  Both borrowers intend to install an arsenic filtration system in an attempt to remediate the problem.  However, there is existing municipal water at the Penland Park MHC mortgaged property, which will be used to dilute the well water and bring down the level of arsenic.  At the closing of the Southwood Manor MHC mortgage loan, the originator held back $280,750, which equals 125% of the estimated costs of installing an arsenic filtration system at the Southwood Manor MHC mortgaged property.  At the closing of the Penland Park MHC mortgage loan, the originator held back $230,875, which equals 125% of the estimated costs of installing an arsenic filtration system at the Penland Park MHC mortgaged property.  The respective borrowers also obtained a $2,000,000 environmental insurance policy (covering both the Southwood Manor MHC mortgaged property and the Penland Park MHC mortgaged property) for the benefit of the lender for the term of the mortgage loans, both for liability and for mortgage impairment as a result of arsenic in the water at those properties.  Such policy contains a $100,000 deductible, and has a policy period during which claims may be made that terminates on October 9, 2021.  There can be no assurances that the holdbacks described above will be sufficient for remediation, that the investigations conducted as part of the work plans will not reveal any unanticipated environmental conditions or that the coverage provided under the environmental insurance policy will be sufficient to cover any losses incurred as a result of the existing environmental risks.
 
With respect to the mortgaged properties identified in the bullets below, the related mortgage loan seller obtained a lender’s environmental insurance policy in lieu of a the Phase II Environmental Site Assessment or to address environmental conditions or concerns.
 
 With respect to the mortgaged property identified on Annex A-1 to this prospectus supplement as Susquehanna Valley Mall, which mortgaged property secures a mortgage loan representing approximately 3.0% of the outstanding pool balance as of the cut-off date, a Phase II Site Assessment was recommended by the consultant due to underground hydraulic lifts located on the mortgaged property.  The lender obtained an environmental policy in lieu of a Phase II Environmental Site Assessment. The policy is in an amount equal to $2 million dollars, has a term ending two years beyond the maturity date  and the policy premium has been paid in full.
 
 
S-70

 
 
 With respect to the mortgaged property identified on Annex A-1 to this prospectus supplement as Rancho Penasquitos Towne Center I, which mortgaged property secures a mortgage loan representing approximately 1.5% of the outstanding pool balance as of the cut-off date, a Phase II Environmental Site Assessment was recommended by the consultant due to a former dry cleaning operation at the mortgaged property.  The lender obtained an environmental policy in lieu of a Phase II Environmental Site Assessment.  The policy is in an amount equal to $2 million dollars, has a term ending two years beyond the maturity date and the policy premium has been paid in full.
 
 With respect to the mortgaged property identified on Annex A-1 to this free writing as Rancho Penasquitos Towne Center II, which mortgaged property secures a mortgage loan representing approximately 1.2% of the outstanding pool balance as of the cut-off date, a Phase II Environmental Site Assessment was recommended by the consultant due to a former dry cleaning operation and auto center at the mortgaged property.  The lender obtained an environmental policy in lieu of a Phase II Environmental Site Assessment.  The policy is in an amount equal to $2 million dollars, has a term ending two years beyond the maturity date and the policy premium has been paid in full.
 
There can be no assurance that the policy amounts will be sufficient to remediate any environmental hazards or to clean up the related mortgaged property.
 
For more information regarding environmental considerations, see “Risk Factors—Commercial and Multifamily Loans Are Subject to Certain Risks That Could Adversely Affect the Performance of Your Offered Certificates—Environmental Issues at the Mortgaged Properties May Adversely Affect Payments on Your Certificates” and “Certain Legal Aspects of Mortgage Loans—Environmental Considerations” in the prospectus.
 
The pooling and servicing agreement requires that the special servicer obtain an environmental site assessment of a mortgaged property prior to acquiring title to the mortgaged property on behalf of the issuing entity or assuming its operation.  Such requirement may effectively preclude realization of the security for the related 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 issuing entity will become liable under any environmental law.  However, there can be no assurance that the requirements of the pooling and servicing agreement will effectively insulate the issuing entity from potential liability under environmental laws.  See “The Pooling and Servicing Agreement—Realization Upon Mortgage Loans” in this prospectus supplement and “Certain Legal Aspects of Mortgage Loans—Environmental Considerations” in the prospectus.
 
Borrower May Be Unable To Repay the Remaining Principal Balance on the Maturity Date or Anticipated Repayment Date
 
All of the mortgage loans are non-amortizing or partially amortizing balloon loans or anticipated repayment date loans that provide for substantial payments of principal due at their stated maturities or anticipated repayment dates, as applicable.  Some of the mortgage loans provide for interest-only debt service payments for all or part of their respective terms.
 
Mortgage loans with substantial remaining principal balances at their stated maturity date or anticipated repayment date involve greater risk than fully amortizing mortgage loans.  This is because the borrower may be unable to repay the mortgage loan at that time.  In addition, fully amortizing mortgage loans which may pay interest on an “actual/360” basis but have fixed monthly payments may, in effect, have a small balloon payment due at maturity.
 
Balloon loans involve a greater risk to the lender than amortizing loans because a borrower’s ability to repay a balloon mortgage loan on its stated maturity date or anticipated repayment date typically will depend upon its ability either to refinance the mortgage loan or to sell the mortgaged property at a price sufficient to permit repayment.  A borrower’s ability to effect a refinancing or sale will be affected by a number of factors as described in “Risk Factors—Commercial and Multifamily Mortgage Loans Are
 
 
S-71

 
 
Subject to Certain Risks That Could Adversely Affect the Performance of Your Offered Certificates—Mortgage Loans With Balloon Payments Have a Greater Risk of Default” in the prospectus.
 
Whether or not losses are ultimately sustained, any delay in the collection of a balloon payment on the maturity date or anticipated repayment date that would otherwise be distributable on your certificates will likely extend the weighted average life of your certificates.
 
The current credit crisis and recent economic downturn has resulted in tightened lending standards and a substantial reduction in capital available to refinance commercial mortgage loans at maturity.  These factors have increased the risks of refinancing mortgage loans.  We cannot assure you that each borrower under a balloon loan will have the ability to repay the principal balance of such mortgage loan on the related maturity date.  In addition, we cannot assure you that each borrower with an initial interest-only period will have the ability to make amortizing payments following the expiration of the initial interest-only period.
 
In the case of 1 anticipated repayment date loan (identified in Annex A-1 to this prospectus supplement as BB&T Headquarters Building, representing 1.6% of the outstanding pool balance as of the cut-off date), although the related borrower may have certain incentives to do so, the failure of such borrower to pay the loan in full on its anticipated repayment date will not be an event of default under the loan documents.
 
Neither we nor any of our affiliates nor any other seller or its affiliates will be obligated to refinance any mortgage loan underlying your certificates.  We cannot assure you that any borrower will have the ability to repay the remaining principal balances on the related maturity date or anticipated repayment date.
 
See “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans” in this prospectus supplement.  See “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans” in this prospectus supplement and “Risk Factors—Mortgage Loans With Balloon Payments Have a Greater Risk of Default” in the prospectus.
 
Risks Relating to Borrower Organization or Structure
 
With respect to the mortgage loan borrowers that are characterized as single purpose entities, in most cases, the mortgage loan documents generally contain covenants customarily employed to ensure that a borrower is a single purpose entity.  However, in many cases the borrowers are not required to observe all covenants that are typically required in order for them to be viewed under standard rating agency criteria as “special purpose entities.”  In most cases, the borrowers’ organizational documents or the terms of the mortgage loan documents typically limit their activities to the ownership of only the related mortgaged property or properties and limit the borrowers’ ability to incur additional indebtedness.  These provisions are designed to mitigate the possibility that the borrowers’ financial condition would be adversely impacted by factors unrelated to the mortgaged property and the mortgage loan.  However, we cannot assure you that the related borrowers will comply with these requirements.  Also, although a borrower may currently be characterized as a single purpose entity, such a borrower may have previously owned property other than the related mortgaged property and/or may not have observed all covenants and conditions which typically are required to view a borrower as a “single purpose entity.”  There can be no assurance that circumstances that arose when the borrower did not observe the required covenants will not impact the borrower or the related mortgaged property.  In addition, many of the borrowers and their owners do not have an independent director whose consent would be required to file a voluntary bankruptcy petition on behalf of such borrower.  One of the purposes of an independent director of the borrower (or of a special purpose entity having an interest in the borrower) is to avoid a bankruptcy petition filing which is intended solely to benefit an affiliate and is not justified by the borrower’s own economic circumstances.  Borrowers (and any special purpose entity having an interest in any such borrowers) that do not have an independent director may be more likely to file a voluntary bankruptcy petition and therefore less likely to repay the related mortgage loan.  The bankruptcy of a borrower, or the general partner or the managing member of a borrower, may impair the ability of the lender to enforce its
 
 
S-72

 
 
rights and remedies under the related mortgage.  See “Risk Factors—The Borrower’s Form of Entity May Not Prevent the Borrower’s Bankruptcy” in the prospectus.
 
Delaware Statutory Trusts May Hinder Recovery
 
In the case of the mortgage loan secured by the mortgaged property identified on Annex A-1 to this prospectus supplement as BB&T Headquarters Building, representing 1.6% of the outstanding pool balance as of the cut-off date, the borrower is structured as a Delaware statutory trust.  Delaware statutory trusts are restricted in their ability to actively operate a property, including with respect to loan work-outs, leasing and re-leasing, making material improvements and other material actions affecting the related mortgaged property.  In addition, in the case of a mortgaged property that is owned by a Delaware statutory trust, certain decisions may require the consent of the holders of the beneficial interests in the Delaware statutory trust and, in such event, there is a risk that obtaining such consent will be time consuming and cause delays in the event certain actions need to be taken by or on behalf of the borrower or with respect to the mortgaged property.
 
Risks Related to Additional Debt
 
The mortgage loans generally prohibit the borrower from incurring any additional debt secured by the mortgaged property without the consent of the lender.  Generally, none of the depositor, the mortgage loan sellers, the underwriters, the master servicer, the special servicer, the certificate administrator, the operating advisor or the trustee have made any investigations, searches or inquiries to determine the existence or status of any subordinate secured financing with respect to any of the mortgaged properties at any time following origination of the related mortgage loan.  However, the mortgage loan sellers have informed us that they are aware of the actual or potential additional debt secured by a mortgaged property with respect to the mortgage loans described under “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Other Financing.”
 
The mortgage loans generally prohibit the borrower from incurring future unsecured debt that is not incurred in the ordinary course of business without the consent of the lender.  However, in general, any borrower that does not meet the single-purpose entity criteria may not be prohibited from incurring additional debt.  This additional debt may be secured by other property owned by such borrower.  Certain of these borrowers may have already incurred additional debt.  Also, in certain cases, co-mortgagors have executed the mortgage in order to encumber adjoining property or related property interests.  Such co-mortgagors may not be special purpose entities, and in such cases could have obligations, debt and activities unrelated to the mortgaged property.  In addition, the mortgage loan sellers have informed us that they are aware of actual or potential unsecured debt with respect to the mortgage loans described under “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Other Financing.”
 
Although the mortgage loans generally restrict the transfer or pledging of controlling general partnership and managing member interests in a borrower subject to certain exceptions, the terms of some mortgage loans permit, subject to certain limitations, among others, the transfer or pledge of passive equity interests, such as limited partnership and non-managing membership interests in the related borrower and of less than a certain specified portion of the general partnership and managing membership interests in a borrower.  In addition, in general, the parent entity of any borrower that does not meet single purpose entity criteria may not be restricted in any way from incurring mezzanine debt secured by pledges of their equity interests in such borrower.  In addition, the mortgage loan sellers have informed us that they are aware of existing or potential mezzanine debt with respect to the mortgage loans described under “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Other Financing.”
 
With respect to mezzanine financing, while a mezzanine lender has no security interest in the related mortgaged properties, a default under a mezzanine loan could cause a change in control of the related borrower.  With respect to mortgage loans that permit mezzanine financing, the relative rights of the mortgagee and the related mezzanine lender will generally be set forth in an intercreditor agreement,
 
 
S-73

 
 
which agreements typically provide that the rights of the mezzanine lender (including the right to payment) against the borrower and mortgaged property are subordinate to the rights of the mortgage lender and that the mezzanine lender may not take any enforcement action against the mortgage borrower and mortgaged property.
 
Although the terms of the mortgage loans generally prohibit additional debt of the borrowers and debt secured by direct or indirect ownership interests in the borrowers, except as described under “Description of the Mortgage Pool—Certain Terms and Conditions of the Mortgage Loans—Other Financing,” it has not been confirmed whether or not any of the borrowers has incurred additional secured or unsecured debt, or has permitted encumbrances on the direct or indirect ownership interests in such borrowers.  There can be no assurance that the borrowers have complied with the restrictions on indebtedness contained in the related mortgage loan documents.
 
When a borrower (or its constituent members) also has one or more other outstanding loans (even if subordinated, mezzanine or unsecured loans), the issuing entity is subjected to additional risk.  The borrower may have difficulty servicing and repaying multiple loans.  The existence of another loan generally makes it more difficult for the borrower to obtain refinancing of the mortgage loan and may thereby jeopardize repayment of the mortgage loan.  Moreover, the need to service additional debt may reduce the cash flow available to the borrower to operate and maintain the mortgaged property.  In addition, the current and any future mezzanine lender may have cure rights with respect to the related mortgage loan, certain consent rights regarding, among other things, modifications of the related mortgage loan, certain consent rights regarding, among other things, annual budgets, leases and alterations with respect to the related mortgaged property and/or an option to purchase the mortgage loan after a default or transfer to special servicing pursuant to an intercreditor agreement.  The option to purchase the mortgage loan may cause an early prepayment of the related mortgage loan.
 
Additionally, if the borrower (or its constituent members) defaults on the mortgage loan and/or any other loan, actions taken by other lenders could impair the security available to the issuing entity.  If a junior lender files an involuntary petition for bankruptcy against the borrower (or the borrower files a voluntary petition to stay enforcement by a junior lender), the issuing entity’s ability to foreclose on the property would be automatically stayed, and principal and interest payments might not be made during the course of the bankruptcy case.  The bankruptcy of another lender also may operate to stay foreclosure by the issuing entity.  See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws” in the prospectus.
 
Furthermore, if another mortgage loan secured by the mortgaged property is in default, the other lender may foreclose on the mortgaged property or, in the case of a mezzanine loan, the related mezzanine lender may foreclose on its equity collateral or exercise its purchase rights, in each case, absent an agreement to the contrary, thereby causing a delay in payments, a change in control of the borrower and/or an involuntary repayment of the mortgage loan prior to its maturity date or its anticipated repayment date, as applicable.  The issuing entity may also be subject to the costs and administrative burdens of involvement in foreclosure proceedings or related litigation.  In cases where the issuing entity is a party to any co-lender, intercreditor or similar agreement in connection with the additional debt described above, some provisions contained in that co-lender, intercreditor or similar agreement restricting another lender’s actions may not be enforceable by the trustee on behalf of the issuing entity.  If, in the event of the related borrower’s bankruptcy, a court refuses to enforce certain restrictions against another lender, such as provisions whereby such other lender has agreed not to take direct actions with respect to the related debt, including any actions relating to the bankruptcy of the related borrower, or not to vote the lender’s claim with respect to a bankruptcy proceeding, there could be a resulting impairment and/or delay in the trustee’s ability to recover with respect to the related borrower.
 
Bankruptcy Proceedings Entail Certain Risks
 
Under the federal bankruptcy code, the filing of a petition in bankruptcy by or against a borrower will stay the sale of the real property owned by that borrower, as well as the commencement or continuation of a foreclosure action or any deficiency judgment proceedings.  In addition, even if a court determines
 
 
S-74

 
 
that the value of the mortgaged property is less than the principal balance of the mortgage loan it secures, the court may prevent a lender from foreclosing on the mortgaged property (subject to certain protections available to the lender).  As part of a restructuring plan, a court also may reduce the amount of secured indebtedness to the then-current value of the mortgaged property.  This action would make the lender a general unsecured creditor for the difference between the then-current value and the amount of its outstanding mortgage indebtedness.  A bankruptcy court also may:
 
 grant a debtor a reasonable time to cure a payment default on a mortgage loan;
 
 reduce monthly payments due under a mortgage loan;
 
 change the rate of interest due on a mortgage loan; or
 
 otherwise alter the mortgage loan’s repayment schedule.
 
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a junior lienholder may stay the senior lienholder from taking action to foreclose on the junior lien.  Additionally, the borrower, as debtor-in-possession, or its bankruptcy trustee, has certain special powers to avoid, subordinate or disallow debts.  In certain circumstances, the claims of the trustee, on behalf of the certificateholders, may be subordinated to financing obtained by a debtor-in-possession subsequent to its bankruptcy.
 
Under the federal bankruptcy code, the lender will be stayed from enforcing a borrower’s assignment of rents and leases.  The federal bankruptcy code also may interfere with the trustee’s ability to enforce any lockbox requirements.  The legal proceedings necessary to resolve these issues can be time consuming and costly and may significantly delay or diminish the lender’s receipt of rents.  Rents also may escape an assignment to the extent they are used by the borrower to maintain the mortgaged property or for other court authorized expenses.
 
As a result of the foregoing, the trustee’s recovery with respect to borrowers in bankruptcy proceedings may be significantly delayed, and the aggregate amount ultimately collected may be substantially less than the amount owed.
 
Certain of the mortgage loans may have a loan sponsor that has filed for bankruptcy protection more than ten years ago.  In all cases of which we are aware, the entity that was in bankruptcy has emerged from bankruptcy, although such entity may have emerged from bankruptcy within the last ten years.  Certain of the mortgage loans may have had a loan sponsor that filed (or a loan sponsor that caused an entity under its control to file) for bankruptcy protection within the last ten years.  See “—Prior Bankruptcies, Defaults or Other Proceedings May Be Relevant to Future Performance” below.  We cannot assure you that, with respect to a loan sponsor that has filed for bankruptcy in the past, such loan sponsor will not be more likely than other sponsors to utilize their rights in bankruptcy in the event of any threatened action by the lender to enforce its rights under the related mortgage loan documents.  Nor can we assure you that the bankruptcies of loan sponsors have in all cases been disclosed to us.
 
Risks Related to Loan Sponsor Guaranties
 
In connection with the origination of certain mortgage loans, a borrower may have been permitted to provide a guaranty from its parent or loan sponsor in lieu of funding a reserve or providing an irrevocable letter of credit.  A loan sponsor on a guaranty in lieu of reserves will typically be an individual or operating entity; as such, it is capable of incurring liabilities, whether intentionally (such as incurring other debt) or unintentionally (such as being named in a lawsuit).  In addition, such individuals and entities are not restricted from filing for bankruptcy protection.  Notwithstanding any net worth requirements that may be contained in a guaranty, there can be no assurance that a loan sponsor or guarantor will be willing or financially able to satisfy guaranteed obligations.  See “—Risks Related to Litigation and Condemnation” below.
 
 
S-75

 
 
Lack of Skillful Property Management Entail Risks
 
The successful operation of a real estate project depends upon the property manager’s performance and viability.  The property manager is generally 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 hotels and self storage facilities, are generally more management intensive than properties leased to creditworthy tenants under long-term leases.
 
A good property manager, by controlling costs, providing appropriate service to tenants and seeing to the maintenance of improvements, can improve cash flow, reduce vacancy, leasing and repair costs and preserve the building’s value.  On the other hand, management errors can, in some cases, impair short-term cash flow and the long-term viability of an income producing property.
 
A substantial number of the mortgaged properties are managed by property managers affiliated with the respective borrowers.  No representation or warranty can be made as to the skills or experience of any present or future managers.  Many of the property managers are affiliated with the borrower and, in some cases, such property managers may not manage any other properties.  Additionally, there can be no assurance that the related property manager will be in a financial condition to fulfill its management responsibilities throughout the terms of its respective management agreement.  See also “Risks Related to Conflicts of Interest—Conflicts Between Property Managers and the Borrowers” in this prospectus supplement.
 
Risks of Inspections Relating to Property
 
With limited exception, licensed engineers or consultants inspected the mortgaged properties in connection with the origination of the mortgage loans to assess items such as structure, exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements.  However, there is no assurance that all conditions requiring repair or replacement were identified, or that any required repairs or replacements were effected.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Johnstown Galleria – Ground Lease, which is a leased fee property and secures a mortgage loan that represents 1.4% of the outstanding pool balance as of the cut-off date, no such inspection was conducted.
 
World Events and Natural (or Other) Disasters Could Have an Adverse Impact on the Mortgaged Properties and Could Reduce the Cash Flow Available To Make Payments on the Certificates
 
The world-wide economic crisis has had a material impact on general economic conditions, consumer confidence and market liquidity.  The economic impact of the United States’ military operations in Afghanistan, Iraq and other parts of the world, as well as the possibility of any terrorist attacks domestically or abroad, is uncertain, but could have a material adverse effect on general economic conditions, consumer confidence, and market liquidity.  We can give no assurance as to the effect of these events on consumer confidence and the performance of the mortgage loans held by the issuing entity.  Any adverse impact resulting from these events would be borne by the holders of one or more classes of the certificates.  In addition, natural disasters, including earthquakes, floods and hurricanes,
 
 
S-76

 
 
and other disasters, such as the oil spill in the Gulf of Mexico in 2010, also may adversely affect the real properties securing the mortgage loans that back your certificates.  For example, real properties located in California may be more susceptible to certain hazards (such as earthquakes or widespread fires) than properties in other parts of the country and mortgaged real properties located in coastal states generally may be more susceptible to hurricanes than properties in other parts of the country.  Hurricanes and related windstorms, floods and tornadoes have caused extensive and catastrophic physical damage in and to coastal and inland areas located in the Gulf Coast region of the United States and certain other parts of the southeastern United States.  The underlying mortgage loans do not all require the maintenance of flood insurance for the related real properties.  We cannot assure you that any damage caused by hurricanes, windstorms, floods or tornadoes would be covered by insurance.
 
Inadequate Property Insurance Coverage Could Have an Adverse Impact on the Mortgaged Properties
 
Certain Risks Are Not Covered under Standard Insurance Policies
 
In general (other than where the mortgage loan documents permit the borrower to rely on a tenant to obtain the insurance coverage, including in each such case a ground tenant, on self-insurance provided by a tenant or on a tenant’s agreement to rebuild or continue paying rent), the master servicer and special servicer will be required to cause the borrower on each mortgage loan to maintain such insurance coverage in respect of the related mortgaged property as is required under the related mortgage.  See “Description of the Mortgage Pool—Certain Underwriting Matters—Property, Liability and Other Insurance” in this prospectus supplement.  In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of a 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 (windstorm is a common exclusion for properties located in certain locations).  Most policies typically do not cover any physical damage resulting from, among other things:
 
 war;
 
 revolution;
 
 terrorism;
 
 nuclear, biological or chemical materials;
 
 governmental actions;
 
 floods and other water related causes;
 
 earth movement, including earthquakes, landslides and mudflows;
 
 wet or dry rot;
 
 vermin; and
 
 domestic animals.
 
Unless the related mortgage loan documents specifically require the borrower to insure against physical damage arising from such causes, then, the resulting losses may be borne by you as a holder of certificates.  See “The Pooling and Servicing Agreement—Insurance Policies.”
 
 
S-77

 
 
Standard Insurance May Be Inadequate Even for Types of Losses That Are Insured Against
 
Even if a type of loss is covered by the insurance policies required to be in place at the mortgaged properties, the mortgaged properties may suffer losses for which the insurance coverage is inadequate.  For example:
 
 in a case where terrorism coverage is included under a policy, if the terrorist attack is, for example, nuclear, biological or chemical in nature, the policy may include an exclusion that precludes coverage for such terrorist attack;
 
 in certain cases, particularly where land values are high, the insurable value (at the time of origination of the mortgage loan) of the mortgaged property may be significantly lower than the principal balance of the mortgage loan;
 
 with respect to mortgaged properties located in flood prone areas where flood insurance is required, the related mortgaged property may only have federal flood insurance (which only covers up to $500,000), not private flood insurance, and the related mortgaged property may suffer losses that exceed the amounts covered by the federal flood insurance;
 
 the mortgage loan documents may limit the requirement to obtain related insurance to where the premium amounts are “commercially reasonable” or a similar limitation; and
 
 if reconstruction or major repairs are required, changes in laws may materially affect the borrower’s ability to effect any reconstruction or major repairs and/or may materially increase the costs of the reconstruction or repairs and insurance may not cover or sufficiently compensate the insured.
 
There Is No Assurance That Required Insurance Will Be Maintained
 
There is no assurance that borrowers have maintained or will maintain the insurance required under the mortgage loan documents or that such insurance will be adequate.
 
Even if the mortgage loan documents specify that the related borrower must maintain standard extended coverage casualty insurance or other insurance that covers acts of terrorism, the borrower may fail to maintain such insurance and the master servicer or the special servicer may not enforce such default or cause the borrower to obtain such insurance if the special servicer has determined, in accordance with the servicing standards and subject to the discussion under “The Pooling and Servicing Agreement—The Directing Holder” and “The Pooling and Servicing Agreement—The Operating Advisor” in this prospectus supplement, that either (a) such insurance is not available at any rate or (b) 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 geographic region in which such mortgaged property is located (such default, an “Acceptable Insurance Default”).  Additionally, if the related borrower fails to maintain such insurance, neither the applicable master servicer nor the special servicer will be required to maintain such terrorism insurance coverage if the special servicer determines, in accordance with the servicing standards, that such insurance is not available for the reasons set forth in (a) or (b) of the preceding sentence.  Furthermore, at the time existing insurance policies are subject to renewal, there is no assurance that terrorism insurance coverage will be available and covered under the new policies or, if covered, whether such coverage will be adequate.  Most insurance policies covering commercial real properties such as the mortgaged properties are subject to renewal on an annual basis.  If this coverage is not currently in effect, is not adequate or is ultimately not continued with respect to some of the mortgaged properties and one of those properties suffers a casualty loss as a result of a terrorist act, then the resulting casualty loss could reduce the amount available to make distributions on your certificates.
 
As a result of any of the foregoing, the amount available to make distributions on your certificates could be reduced.
 
 
S-78

 
 
Risks Associated with Blanket Insurance Policies or Self-Insurance
 
Certain of the mortgaged properties are covered by blanket insurance policies, which also cover other properties of the related borrower or its affiliates (including certain properties in close proximity to the mortgaged properties).  In the event that such policies are drawn on to cover losses on such other properties, the amount of insurance coverage available under such policies would thereby be reduced and could be insufficient to cover insurable risks at the related mortgaged property.  In addition, with respect to some of the mortgaged properties, a sole tenant is permitted to provide self-insurance against risks and/or has agreed to rebuild or just continue paying rent in the event of a casualty.  To the extent that insurance coverage relies on self-insurance, there is risk that the “insurer” will not be willing or have the financial ability to satisfy the claim when the loss occurs.
 
In some cases, the related borrower maintains one or more forms of insurance under blanket policies.  For example, with respect to 22 of the mortgage loans, which collectively represent 65.2% of the outstanding pool balance as of the cut-off date, certain insurance for the related mortgaged property (or, if applicable, some or all of the related mortgaged properties) is under a borrower’s blanket insurance policy.
 
When a mortgaged property is insured pursuant to a blanket policy, there is a risk that casualties at other properties insured under the same blanket policy can exhaust the available coverage and reduce the amount available to be paid in connection with a casualty at the subject mortgaged property.
 
In some cases, and frequently in the case of leased fee properties and properties with a single tenant, a significant tenant, a credit-rated tenant or a tenant with a rated parent, the related mortgage loan documents permit the related borrower to rely on self-insurance or other agreements provided by a tenant or an affiliate thereof in lieu of an insurance policy or the insurance requirements are solely governed by the terms of a related ground lease or other long-term lease.
 
Availability of Terrorism Insurance
 
Following the September 11, 2001 terrorist attacks in New York City and the Washington, D.C. area, many reinsurance companies (which assume some of the risk of policies sold by primary insurers) eliminated coverage for acts of terrorism from their reinsurance policies.  Without that reinsurance coverage, primary insurance companies would have to assume that risk themselves, which may cause them to eliminate such coverage in their policies, increase the amount of the deductible for acts of terrorism or charge higher premiums for such coverage.  In order to offset this risk, Congress passed the Terrorism Risk Insurance Act of 2002, which established the Terrorism Insurance Program.  On December 26, 2007, the Terrorism Insurance Program was extended by the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) through December 31, 2014.
 
The Terrorism Insurance Program is administered by the Secretary of the Treasury and through December 31, 2014 will provide some financial assistance from the United States Government to insurers in the event of another terrorist attack that results in an insurance claim.  The program applies to United States risks only and to acts that are committed by an individual or individuals as an effort to influence or coerce United States civilians or the United States Government.  TRIPRA requires an investigation by the Comptroller General to study the availability and affordability of insurance coverage for nuclear, biological, chemical and radiological attacks.
 
In addition, no compensation will be paid under the Terrorism Insurance Program unless the aggregate industry losses relating to such act of terror exceed $100 million.  As a result, unless the borrowers obtain separate coverage for events that do not meet these thresholds (which coverage may not be required by the respective mortgage loan documents and may not otherwise be obtainable), such events would not be covered.
 
The Treasury Department has established procedures for the Terrorism Insurance Program under which the federal share of compensation will be equal to 85% of the portion of insured losses that exceeds an applicable insurer deductible required to be paid during each program year (which insurer
 
 
S-79

 
 
deductible was fixed by the TRIPRA at 20% of an insurer’s direct earned premium for any program year).  The federal share in the aggregate in any program year may not exceed $100 billion (and the insurers will be liable for any amount that exceeds this cap).  An insurer that has paid its deductible is not liable for the payment of any portion of total annual United States wide losses that exceed $100 billion, regardless of the terms of the individual insurance contracts.
 
Through December 2014, insurance carriers are required under the program to provide terrorism coverage in their basic policies providing “special” form coverage.  Any commercial property and casualty terrorism insurance exclusion that was in force on November 26, 2002 is automatically voided to the extent that it excludes losses that would otherwise be insured losses.  Any state approval of such types of exclusions in force on November 26, 2002 is also voided.
 
Because the Terrorism Insurance Program is a temporary program, we cannot assure you that it will create any long-term changes in the availability and cost of such insurance.  Moreover, we cannot assure you that subsequent terrorism insurance legislation will be passed upon TRIPRA’s expiration.
 
If TRIPRA is not extended or renewed upon its expiration in 2014, premiums for terrorism insurance coverage will likely increase and/or the terms of such insurance may be materially amended to increase stated exclusions or to otherwise effectively decrease the scope of coverage available (perhaps to the point where it is effectively not available).  In addition, to the extent that any policies contain “sunset clauses” (i.e., clauses that void terrorism coverage if the federal insurance backstop program is not renewed), then such policies may cease to provide terrorism insurance upon the expiration of TRIPRA. We cannot assure you that such temporary program will create any long-term changes in the availability and cost of such insurance.
 
Certain Mortgage Loans Limit the Borrower’s Obligation to Obtain Terrorism Insurance
 
In addition, certain of the mortgage loans contain limitations on the borrower’s obligation to obtain terrorism insurance, such as (i) waiving the requirement that such borrowers maintain terrorism insurance, in some cases only if such insurance is not available at commercially reasonable rates and/or if such insurance is not then being maintained for similarly situated properties in the area of the subject mortgaged property, or waiving such requirement altogether, or (ii) providing that the related borrowers may not be required to spend in excess of a specified dollar amount in order to obtain such terrorism insurance, or, (iii) if such terrorism insurance is not available from a “Qualified Carrier,” permitting the related borrower to obtain such terrorism insurance from the highest rated insurance company providing such terrorism coverage, (iv) permitting the related borrower to rely on terrorism insurance obtained by, or on self-insurance provided by, a tenant, or (v) permitting the related borrower to rely on the insurance requirements contained in a related ground lease or other long-term lease.  See “Description of the Mortgage Pool—Certain Underwriting Matters—Property, Liability and Other Insurance” in this prospectus supplement.
 
The various forms of insurance maintained with respect to any of the mortgaged properties, including property and casualty insurance, environmental insurance and earthquake insurance, may be provided under a blanket insurance policy, covering other real properties, some of which may not secure mortgage loans in the issuing entity.  As a result of total limits under blanket policies, losses at other properties covered by the blanket insurance policy may reduce the amount of insurance coverage available with respect to a mortgaged property securing one of the mortgage loans in the issuing entity and the amounts available could be insufficient to cover insured risks at such mortgaged property.
 
With respect to certain of the mortgage loans that we intend to include in the issuing entity, the related mortgage loan documents generally provide that the borrowers are required to maintain comprehensive standard extended coverage casualty insurance but may not specify the nature of the specific risks required to be covered by these insurance policies.
 
With respect to certain of the mortgage loans, the standard extended coverage policy specifically excludes terrorism insurance from its coverage.  In certain of those cases, the related borrower obtained
 
 
S-80

 
 
supplemental terrorism insurance.  In other cases, the lender did not require that terrorism insurance be maintained.
 
There Is No Assurance That Required Terrorism Insurance Will Be Maintained
 
Even if the mortgage loan documents specify that the related borrower must maintain standard extended coverage casualty insurance or other insurance that covers acts of terrorism, the borrower may fail to maintain such insurance and the master servicer or special servicer may not enforce such default or cause the borrower to obtain such insurance if the special servicer has determined, in accordance with the servicing standards, that either (a) such insurance is not available at any rate or (b) such insurance is not available at commercially reasonable rates (which determination, with respect to terrorism insurance, will be subject to consent of the directing holder (which is generally the holder of the majority interest of the most subordinate class then outstanding) 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 geographic region in which such mortgaged property is located.  Additionally, if the related borrower fails to maintain such insurance, neither the master servicer nor the special servicer will be required to maintain such terrorism insurance coverage if the special servicer determines, in accordance with the servicing standards, that such insurance is not available for the reasons set forth in (a) or (b) of the preceding sentence.  Furthermore, at the time existing insurance policies are subject to renewal, there is no assurance that terrorism insurance coverage will be available and covered under the new policies or, if covered, whether such coverage will be adequate.  Most insurance policies covering commercial real properties such as the mortgaged properties are subject to renewal on an annual basis.  If this coverage is not currently in effect, is not adequate or is ultimately not continued with respect to some of the mortgaged properties and one of those properties suffers a casualty loss as a result of a terrorist act, then the resulting casualty loss could reduce the amount available to make distributions on your certificates.
 
As a result of any of the foregoing, the amount available to make distributions on your certificates could be reduced.
 
Appraisals and Market Studies Have Certain Limitations
 
An appraisal or other market analysis was conducted with respect to the mortgaged properties in connection with the origination or acquisition of the related mortgage loans.  The resulting estimates of value are the bases of the cut-off date loan to value ratios referred to in this prospectus supplement.  Those estimates represent the analysis and opinion of the person performing the appraisal or market analysis and are not guarantees of present or future values.  There can be no assurance that another appraiser would not have arrived at a different evaluation, even if such appraiser used the same general approach to, and the same method of, appraising the mortgaged property.  Moreover, the values of the mortgaged properties may have fluctuated significantly since the appraisal or market study was performed.  In addition, appraisals seek to establish the amount a typically motivated buyer would pay a typically motivated seller.  Such amount could be significantly higher than the amount obtained from the sale of a mortgaged property under a distress or liquidation sale.  In certain cases, appraisals may reflect “as stabilized” values, reflecting certain assumptions, such as future construction completion, projected re-tenanting or increased tenant occupancies.  Information regarding the appraised values of mortgaged properties available to the Depositor as of the cut-off date is presented in Annex A-1 to this prospectus supplement for illustrative purposes only.  See “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this prospectus supplement.
 
Increases in Real Estate Taxes Due to Termination of a PILOT Program or Other Tax Abatement Arrangements May Reduce Payments to Certificateholders
 
Certain of the mortgaged properties securing the mortgage loans have or may in the future have the benefit of reduced real estate taxes under a local government program of payment in lieu of taxes (often known as a “PILOT” program) or other tax abatement arrangements.  Some of these programs or arrangements are scheduled to terminate or have significant tax increases prior to the maturity of the related mortgage loan, resulting in higher, and in some cases substantially higher, real estate tax
 
 
S-81

 
 
obligations for the related borrower.  An increase in real estate taxes may impact the ability of the borrower to pay debt service on the mortgage loans or refinance the mortgage loans at maturity.  There are no assurances that any such program will continue for the duration of the related mortgage loan or would survive a mortgage loan foreclosure or deed in lieu of foreclosure.
 
The mortgaged property identified on Annex A-1 to this prospectus supplement as Spalding Building, which secures a mortgage loan representing 0.8% of the outstanding pool balance as of the cut-off date, currently benefits from an historic property tax abatement.  The exemption, which froze the assessed value on which real estate taxes are calculated at $4,864,400, is scheduled to expire in 2015.  In 2015, the property will be appraised, a new assessed value will be assigned to the property and taxes will be recalculated based on the new assessed value multiplied by the then current mill rate.  The Spalding Building mortgaged property has a current appraised value of $11,800,000.
 
The mortgaged property identified on Annex A-1 to this prospectus supplement as Comfort Inn JFK at Ozone Park, which secures a mortgage loan that represents 1.0% of the outstanding pool balance as of the cut-off date, benefits from a tax abatement that reduces the current taxes payable from approximately $350,000 per year to approximately $78,000 per year.  The abatement is scheduled to remain in full effect through 2018 and will then begin to decline until it reaches zero in 2023.
 
Risks Related to Enforceability
 
All of the mortgages permit the lender to accelerate the debt upon default by the borrower.  The courts of all states will enforce acceleration clauses in the event of a material payment default, subject in some cases to a right of the court to revoke such acceleration and reinstate the mortgage loan if a payment default is cured.  The equity courts of any state, however, may refuse to allow the foreclosure of a mortgage, deed of trust, or other security instrument or to permit the acceleration of the indebtedness if:
 
 the exercise of those remedies would be inequitable or unjust; or
 
 the circumstances would render the acceleration unconscionable.
 
Thus, a court may refuse to permit foreclosure or acceleration if a default is deemed immaterial or the exercise of those remedies would be unjust or unconscionable or if a material default is cured.
 
Risks Related to Enforceability of Prepayment Premiums, Yield Maintenance Charges and Defeasance Provisions
 
Provisions requiring yield maintenance charges, prepayment premiums and lock-out periods may not be enforceable in some states and under federal bankruptcy law.  Those provisions for charges and premiums also may constitute interest for usury purposes.  Accordingly, we cannot assure you that the obligation to pay a yield maintenance charge or prepayment premium or to prohibit prepayments will be enforceable.  There is no assurance that the foreclosure proceeds will be sufficient to pay an enforceable yield maintenance charge or prepayment premium.  Additionally, although the collateral substitution provisions related to defeasance do not have the same effect on the certificateholders as prepayment, there is no assurance that a court would not interpret those provisions as requiring a yield maintenance charge or prepayment premium.  In certain jurisdictions those collateral substitution provisions might therefore be deemed unenforceable under applicable law, or usurious.
 
The Master Servicer or the Special Servicer May Experience Difficulty in Collecting Rents upon the Default and/or Bankruptcy of a Borrower
 
If a mortgaged property has tenants, the borrower typically assigns its income as landlord to the lender as further security (typically under an assignment of leases and rents), while retaining a license to collect rents as long as there is no default.  If the borrower defaults, the license terminates and the lender is entitled to collect rents.  In certain jurisdictions, these assignments are typically not perfected as security interests until the lender takes actual possession of the property’s cash flow.  In some jurisdictions, the lender may not be entitled to collect rents until the lender takes possession of the
 
 
S-82

 
 
mortgaged property and secures a judicial appointment of a receiver before becoming entitled to collect rents, in which case, the receiver, rather than the lender, would be entitled to collect the rents.  A receiver generally may not be appointed as a matter of right, and appointment of a receiver may be delayed or subject to a court’s approval.  In addition, as discussed above, if bankruptcy or similar proceedings are commenced by or for the borrower, the lender’s ability to collect the rents may be adversely affected.  See “Certain Legal Aspects of Mortgage Loans—Leases and Rents” in the prospectus.
 
Risks Related to Mortgage Loans Secured by Multiple Properties
 
Six (6) mortgage loans, representing 22.6% of the outstanding pool balance as of the cut-off date, are secured by more than one mortgaged property, and 2 mortgage loans, representing 3.7% of the outstanding pool balance as of the cut-off date, are cross-collateralized and cross-defaulted with each other.  These arrangements are designed primarily to ensure that all of the collateral pledged to secure the respective mortgage loans in a cross-collateralized group or to secure a multi-property mortgage loan, and the cash flows generated by such properties, are available to support debt service on, and ultimate repayment of, the aggregate indebtedness secured by such properties.  This arrangement thus seeks to reduce the risk that the inability of one or more of the mortgaged properties securing any such mortgage loans to generate net operating income sufficient to pay debt service, or a decline in the value of one or more such mortgaged properties, will result in defaults and ultimate losses.
 
There may not be complete identity of ownership of the mortgaged properties securing a multi-property mortgage loan or a cross-collateralized group of mortgage loans.  Mortgage loans to co-borrowers or co-mortgagors secured by multiple properties or multiple parcels within a single mortgaged property could be challenged as a fraudulent conveyance by creditors of a borrower or mortgagor or by the representative of the bankruptcy estate of a borrower if a borrower or mortgagor were to become a debtor in a bankruptcy case.  Generally, under federal and most state fraudulent conveyance statutes, the incurring of an obligation or the transfer of property by a person will be subject to avoidance under certain circumstances if the person did not receive fair consideration or reasonably equivalent value in exchange for such obligation or transfer and:
 
 was insolvent or was rendered insolvent by such obligation or transfer,
 
 was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the person was an unreasonably small capital, or
 
 intended to, or believed that it would, incur debts that would be beyond the person’s ability to pay as such debts matured.
 
Accordingly, a lien granted by a borrower to secure repayment of another borrower’s mortgage loan could be avoided if a court were to determine that:
 
 such borrower was insolvent at the time of granting the lien, was rendered insolvent by the granting of the lien, or was left with inadequate capital, or was not able to pay its debts as they matured, and
 
 the borrower did not, when it allowed its property to be encumbered by a lien securing the entire indebtedness represented by the mortgage loan, receive fair consideration or reasonably equivalent value for pledging such property for the benefit of the other borrower.
 
If the lien is avoided, the lender would lose the benefits afforded by such lien.
 
Some of the multi-property collateralized mortgage loans are secured by mortgage liens on mortgaged properties located in different states.  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 any such 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 related mortgages is
 
 
S-83

 
 
not impaired or released.  Therefore, the lender would experience delay in exercising remedies with respect to multi-property collateralized mortgage loans secured by properties located in more than one state or jurisdiction.
 
In addition, the amount of the mortgage lien encumbering any particular one of the mortgaged properties securing a multi-property mortgage loan is in some cases less than the full amount of the related mortgage loan, generally to minimize mortgage recording tax.  In these cases the mortgage may be limited to the allocated loan amount for the related mortgaged property or some other amount that is less than or equal to the appraised value of the mortgaged property at the time of origination.  This would limit the extent to which proceeds from the mortgaged property would be available to offset declines in value of the other mortgaged properties securing the same mortgage loan or group of mortgage loans.
 
State Law Limitations Entail Certain Risks
 
The ability to realize upon the mortgage loans may be limited by the application of state and federal laws.  Several states (including California) have laws that prohibit more than one “judicial action” to enforce a mortgage obligation.  Some courts have construed the term “judicial action” broadly.  Accordingly, the special servicer may need to obtain advice of counsel prior to enforcing any of the issuing entity’s rights under any of the mortgage loans that include mortgaged properties where a “one action” rule could be applicable.  In the case of a mortgage loan secured by multiple mortgaged properties located in multiple states, the special servicer may be required to foreclose first on mortgaged properties located in states where such “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.  As a result, the ability to realize upon the mortgage loans may be limited by the application of state laws and may delay or otherwise limit the ability to realize on defaulted mortgage loans.  See “Certain Legal Aspects of Mortgage Loans—Foreclosure” in the prospectus.  Foreclosure actions may also, in certain circumstances, subject the issuing entity to liability as a “lender-in-possession” or result in the equitable subordination of the claims of the trustee to the claims of other creditors of the borrower.  The special servicer may take these state laws into consideration in deciding which remedy to choose following a default by a borrower.
 
Leased Fee Properties Entail Risks that May Adversely Affect Payments on Your Certificates
 
The mortgaged property identified on Annex A-1 to this prospectus supplement as Johnstown Galleria – Ground Lease, securing a mortgage loan representing 1.4% of the outstanding pool balance as of the cut-off date, is comprised of a fee interest in land subject to a ground lease granted by the borrower to another party, which party owns the improvements.  The related leasehold estate is not included in the issuing entity and is operated as a retail property.
 
Land subject to a ground lease presents special risks.  In such cases, where the borrower owns the fee interest but not the related improvements, such borrower will only receive the rental income from the ground lease and not from the operation of any related improvements.  Any default by the ground lessee would adversely affect the borrower’s ability to make payments on the related mortgage loan.  While ground leases may contain certain restrictions on the use and operation of the related mortgaged property, the ground lessee generally enjoys the rights and privileges of a fee owner, including the right to construct, alter and remove improvements and fixtures from the land and to assign and sublet the ground leasehold interest.  However, the borrower has the same risk of interruptions in cash flow if such ground lessee defaults under its lease as it would on another single tenant commercial property, without the control over the premises that it would ordinarily have as landlord.  In addition, in the event of a condemnation, the borrower would only be entitled to an allocable share of the condemnation proceeds.  Furthermore, the insurance requirements are often governed by the terms of the ground lease and, in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Johnstown Galleria – Ground Lease, certain subtenants are allowed to self-insure.  The ground lessee is commonly permitted to mortgage its ground leasehold interest, and the leasehold lender will often have notice and cure rights with respect to material defaults under the ground lease.  In addition, leased fee interests are less frequently purchased and sold than other interest in commercial real property.  It may be difficult for
 
 
S-84

 
 
the issuing entity, if it became a foreclosing lender, to sell the fee interests if the tenant and its improvements remain on the land.  In addition, if the improvements are nearing the end of their useful life, there could be a risk that the tenant defaults in lieu of performing any obligations it may otherwise have to raze the structure and return the land in raw form to the developer.  Furthermore, leased fee interests are generally subject to the same risks associated with the property type of the ground lessee’s use of the premises because that use is a source of revenue for the payment of ground rent.
 
Mortgage Loans Secured by Leasehold Interests May Expose Investors to Greater Risks of Default and Loss
 
Three (3) mortgaged properties, which represent security for mortgage loans representing 18.4% of the outstanding pool balance as of the cut-off date, are secured by a mortgage on (i) the borrower’s leasehold (or subleasehold) interest in the related mortgaged property and not the related fee simple interest or (ii) the borrower’s leasehold interest in a portion of the related mortgaged property and the borrower’s fee simple interest in the remainder of the related mortgaged property.
 
Mortgage loans secured in whole or in part by a lien on the leasehold estate of the borrower 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 interest were to be terminated upon a lease default or in connection with a lessor or lessee bankruptcy, the leasehold mortgagee would lose its security in such leasehold interest.  Generally, the related ground lease requires the lessor to give the leasehold mortgagee notice of lessee defaults and an opportunity to cure them, permits the leasehold estate to be assigned to the leasehold mortgagee or the purchaser at a foreclosure sale, and may contain certain other provisions beneficial to a mortgagee.
 
Upon the bankruptcy of a lessor or a lessee under a ground lease, the debtor has the right to assume or reject the lease.  If a debtor lessor rejects the lease, the lessee generally has the right (pursuant to section 365(h) of the federal bankruptcy code) to remain in possession of its leased premises paying the rent required under the lease for the term of the lease (including renewals) and to offset against such rent any damages incurred due to the landlord’s failure to perform its obligations under the lease (although in certain cases a bankrupt lessor may obtain court approval to dispose of the related property free and clear of the lessee’s interest).  If a debtor lessee/borrower rejects the lease, the leasehold lender could succeed to the lessee/borrower’s position under the lease only if the lease specifically grants the lender such right.  If both the lessor and the lessee/borrower are involved in bankruptcy proceedings, the trustee may be unable to enforce the bankrupt lessee/borrower’s obligation to refuse to treat a ground lease rejected by a bankrupt lessor as terminated.  In such circumstances, a lease could be terminated notwithstanding lender protection provisions contained therein or in the mortgage.  See “Certain Legal Aspects of Mortgage Loans—Bankruptcy Laws” in the prospectus.
 
Other concerns:
 
 A ground lease may contain use restrictions that could adversely affect the ability of the related borrower to lease or sell the mortgaged property on favorable terms, thus adversely affecting the borrower’s ability to fulfill its obligations under the related mortgage loan.  For example, in the case of the Union Square Retail ground lease referred to below, the ground lease imposes certain retail use restrictions with respect to the related mortgaged property and imposes economic conditions for subleases that would affect the use of the related mortgaged property and impose restrictions on subletting.
 
 The related ground lease may limit a leasehold mortgagee’s right to hold and/or control application of insurance and condemnation proceeds derived from the applicable mortgaged property.  For example, in the case of the Union Square Retail ground lease referred to below, the leasehold mortgagee’s rights may be subject to the ground lessor’s right to receive a share of such proceeds, to apply such proceeds to the repair or restoration of the applicable mortgaged property and/or to hold, or appoint a third party to hold, such proceeds pending the repair or restoration of the applicable mortgaged property.
 
 
S-85

 
 
 The terms of a ground lease may provide that the ground rent payable under the related ground lease increases during the term of the mortgage loan.  These increases may adversely affect the cash flow and net income of the borrower from the mortgaged property.  In addition, the Union Square Retail ground lease referred to below provides for definite increases or potential increases in the base ground rent no less often than every five (5) years based on the formulas set forth in the ground lease.
 
 The terms of a ground lease may limit the circumstances under which a leasehold mortgagee may obtain a new ground lease following a termination of the ground lease with the related borrower.  For example, in the case of the Union Square Retail ground lease referred to below, a new lease may be obtained only in the case of (a) a rejection of the ground lease in a bankruptcy of the related borrower, unless the ground lease has otherwise been terminated as a result of mortgagee’s failure to cure a default under such ground lease, and (b) a termination of the ground lease by the ground lessor following a non-monetary event of default based on ground lessor’s good faith belief that (i) the mortgagee was not adequately pursuing cure of the related non-monetary event of default or (ii) termination of the ground lease was in the best in interest of lessor.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Union Square Retail, which secures a mortgage loan representing approximately 8.0% of the outstanding pool balance as of the cut-off date, the related borrower holds a leasehold interest in such mortgaged property under a ground lease with First Sterling Corporation and West Realty Co., LLC as landlord, which ground lease is scheduled to terminate on December 31, 2095.  Approximately 49.7% of the net rentable square feet at the Union Square Retail mortgaged property was previously subleased to Virgin Entertainment Group, Inc. and Circuit City Stores, Inc., respectively.  In November 2008, Circuit City filed for bankruptcy.  In March 2009, Union Square Development Associates, LLC (“USDA”), currently a wholly-owned subsidiary of the Union Square Retail borrower, acquired the tenant’s interest under the Circuit City sublease at a bankruptcy auction.  USDA is currently the landlord under a sub-sublease of the former Circuit City space with Best Buy as the tenant.  In June 2009, Union Square Development Associates II, LLC (“USDA II”), also currently a wholly-owned subsidiary of the Union Square Retail borrower, acquired by assignment the tenant’s interest under the Virgin Entertainment sublease.  USDA II is currently the landlord under various sub-subleases of the former Virgin Entertainment space with Nordstrom Rack, Duane Reade, Citibank, N.A., Park South Imaging Holdings LP and Union Square Wines as tenants.  Certain percentage rent payments and future adjustments to the annual base rental rate under the Union Square Retail ground lease are or will be, as the case may be, based in part on these subleases.  In connection with the foregoing, the Union Square Retail ground lessors commenced litigation against the Union Square Retail borrower, USDA, USDA II and certain direct or indirect equity owners of the Union Square Retail borrower in the Supreme Court of the State of New York, New York County, bearing Index No. 600868/2010.  The plaintiffs in the Union Square Retail ground lease litigation have asserted, among others, claims that (x) the related borrower failed to obtain the plaintiff’s consent prior to terminating or modifying the Circuit City and Virgin Entertainment subleases (under which USDA and USDA II are now the tenants) to avoid obligations to pay the plaintiffs increased ground rent under the Union Square Retail ground lease, (y) the ground lessors are owed additional rent under the Union Square Retail ground lease (amount not quantified), and (z) certain uses by Nordstrom Rack, Citibank, N.A. and Duane Reade (tenants under current sub-subleases with USDA and USDA II) are prohibited under the Union Square Retail ground lease and/or the defendant’s consent to such uses amounted to a breach of the Union Square Retail ground lease.  In a recent ruling, the court granted the defendants’ motion to dismiss certain of the above claims, and denied it with respect to others.  The court’s ruling is appealable.
 
The complaint, as amended, in the Union Square Retail ground lease litigation does not stipulate a specific dollar amount in damages that the plaintiffs allege, only that as a result of the above claims, they have, and will continue to sustain, damages in an amount to be proven at trial. The potential damages would include both historical lost ground rent increases since the signing of the replacement “sub-subleases”, as well as potential increases in ground rent payments on a going forward basis.  The Union Square Retail borrower has disclosed in the related loan documents that if the Union Square Retail
 
 
S-86

 
 
ground lease litigation is decided in a manner adverse to the Union Square Retail borrower, then the Union Square Retail borrower could be in default under the Union Square Retail ground lease. However, the Union Square Retail borrower represented and warranted in the related loan documents that it believes, in good faith, that no default exists under the Union Square Retail ground lease and that, if the Union Square Retail borrower is found to be in default under the Union Square Retail ground lease in connection with the above described litigation, the Union Square Retail borrower has the right and ability to cure such default under the Union Square Retail ground lease.  Although the lender under the Union Square Retail mortgage loan has been granted the right to cure tenant defaults under the Union Square Retail ground lease that continue beyond any applicable tenant cure periods under the Union Square Retail ground lease, such lender has agreed in the related loan documents that it will exercise such cure rights with respect to any such default as a result of any acts or omissions of the borrower, USDA or USDA II alleged in or related to the Union Square Retail ground lease litigation only after making a demand on the Union Square Retail borrower and such borrower’s failure to promptly comply with such demand; provided that such lender’s agreement to delay in exercising its cure right only applies as long as (a) a final judgment has not been entered against the defendants in such litigation or (b) if a judgment has been entered, (i) such judgment has been effectively stayed pending appeal and (ii) the ground lessor is enjoined from exercising or enforcing any termination rights and remedies under the Union Square Retail ground lease during the pendency of such appeal.  This is intended to permit the borrower under the Union Square Retail mortgage loan to negotiate and potentially settle the issue with the Union Square Retail ground lessors.  The Union Square Retail ground lessors have not sought to terminate the Union Square Retail ground lease in connection with the above-described litigation.  However, it is possible that, at some future date, the Union Square Retail ground lessors may (a) attempt to terminate the Union Square Retail ground lease based on the alleged defaults described above and/or (b) refuse to accept a cure from the lender under the Union Square Retail mortgage loan based on the theory that the cure period had expired.  Although the originator obtained an acknowledgment from First Sterling Corporation that the mortgage for the Union Square Retail mortgage loan is a “recognized mortgage” under the Union Square Retail ground lease, that acknowledgment specifically disclosed the Union Square Retail ground lease litigation, and a standard ground lessor estoppel was not obtained.  The Related Companies, L.P., which holds a 49.0% indirect equity interest in the Union Square Retail borrower, has, for the benefit of the lender under the Union Square Retail mortgage loan, guaranteed the prompt and complete payment of amounts due under the Union Square Retail mortgage loan, to the extent that the Union Square Retail borrower’s inability to pay is the result of certain circumstances, including, but not limited, to:  (a) the Union Square Retail ground lease is terminated in connection with or as a result of a ground lease default that is the subject of the Union Square Retail ground lease litigation or otherwise arising out of or in connection with the Union Square Retail ground lease litigation; (b) the Citibank, N.A. sub-sublease or the Nordstrom Rack sub-sublease is terminated in connection with or as a result of a ground lease default that is the subject of the Union Square Retail ground lease litigation or otherwise arising out of or in connection with the Union Square Retail ground lease litigation; and (c) if the lender under the Union Square Retail mortgage loan, by agreeing not to exercise cure rights with respect to ground lease defaults until after the Union Square Retail borrower’s cure periods, is deprived of the practical ability to (i) cure ground lease defaults, (ii) receive a new ground lease from the landlord if the Union Square Retail ground lease is terminated or (iii) exercise any other material right of available to a leasehold mortgagee under the Union Square Retail ground lease and such ground lease is thereafter terminated prior to such ground lease default being cured.  Among other things, the existence of a default by the lessee under the Union Square Retail ground lease beyond any applicable notice and cure period and any termination or cancellation of the Union Square Retail ground lease for any reason or under any circumstances whatsoever constitute events of defaults under the Union Square Retail mortgage loan that would allow the lender to accelerate such mortgage loan.  Based upon fair market financials as of December 31, 2009, the value of the equity in The Related Companies, L.P. was approximately $2.269 billion.  In addition, the related borrower has substantial equity in the Union Square Retail mortgaged property, with the loan-to-value ratio as of the cut-off date for the Union Square Retail mortgage loan being equal to 24.2%.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Brea Plaza Shopping Center, which secures a mortgage loan representing 4.6% of the outstanding pool balance as of the cut-off date, a portion of parking area benefitting the property is subject to a ground
 
 
S-87

 
 
lease between the related borrower as tenant and Orange County Flood Control District as landlord, which parking area was constructed above a flood channel.  If such ground lease were terminated, the property could lose the benefit of such parking area, which would grant several tenants at the property the right to terminate their leases.
 
Potential Absence of Attornment Provisions Entails Risks
 
As described in the prospectus under “Risk Factors—Commercial and Multifamily Mortgage Loans Are Subject to Certain Risks That Could Adversely Affect the Performance of Your Offered Certificates—Rights Against Tenants May Be Limited If Leases Are Not Subordinate to Mortgage or Do Not Contain Attornment Provisions,” there are risks related to the absence of attornment provisions.  Not all leases or subleases were reviewed to ascertain the existence of attornment or subordination provisions.  Accordingly, if a mortgaged property is located in a jurisdiction where an attornment provision is required to require the tenant to attorn and such mortgaged property is leased to one or more desirable tenants under leases that are subordinate to the mortgage and do not contain attornment provisions, such mortgaged property could experience a further decline in value if such tenants’ leases were terminated.  This is particularly likely if such tenants were paying above market rents or could not be replaced.
 
If a lease is not subordinate to a mortgage, the issuing entity will not have the right to dispossess the tenant upon foreclosure of the mortgaged property (unless it has otherwise agreed with the tenant).  If the lease contains provisions inconsistent with the mortgage loan documents (e.g., provisions relating to application of insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., a right of first refusal to purchase the property), the provisions of the lease will take precedence over the provisions of the mortgage.  In the event such a lease provision takes precedence over the provisions of the mortgage, such provision may reduce the value of the mortgaged property and may negatively impact your certificates.
 
Risks Related to Zoning Laws
 
As described in the prospectus under “Risk Factors—Commercial and Multifamily Mortgage Loans Are Subject to Certain Risks That Could Adversely Affect the Performance of Your Offered Certificates—If Mortgaged Properties Are Not in Compliance with Current Zoning Laws, Restoration Following a Casualty Loss May Be Limited,” there are risks related to zoning laws.  Certain of the mortgaged properties that do not conform to current zoning laws may not be “legal non-conforming uses” or “legal non-conforming structures.”  The failure of a mortgaged property to comply with zoning laws or to be a “legal non-conforming use” or “legal non-conforming structure” may adversely affect market value of the mortgaged property or the borrower’s ability to continue to use it in the manner it is currently being used or may necessitate material additional expenditures to remedy non-conformities. Violations may be known to exist at a particular mortgaged property, but, except as disclosed below, the related mortgage loan sellers have informed us that, to their knowledge, there are no violations that they consider to be material to the value of the related mortgaged property or that they consider would have a likely negative impact upon your certificates.
 
Certain of the mortgaged properties have zoning violations based on current law related to use, floor area ratio, building separation, height, setbacks, parking or density.  Many of these mortgaged properties have been determined to be legal nonconforming structures, which would be required to be rebuilt in accordance with current zoning requirements in the event of a casualty with respect to in excess of a certain threshold percentage of the property.  In some cases, the related borrower has obtained law and ordinance insurance to cover loss related to the a requirement that the mortgaged property be rebuilt in accordance with current zoning requirements.
 
For example, the portfolio of manufactured housing community mortgaged properties identified on Annex A-1 to this prospectus supplement as Evergreen Portfolio, which secures a mortgage loan representing 1.8% of the outstanding pool balance as of the cut-off date, have several legally non-conforming characteristics, including, in the case of such mortgaged properties identified on Annex A-1 to this prospectus supplement as Vance MHP and Yorktowne MHP, that the use of such properties as
 
 
S-88

 
 
mobile home parks is no longer permitted as of right under the zoning ordinance of the applicable municipalities.  In addition, in the case of the manufactured housing community mortgaged property identified on Annex A-1 to this prospectus supplement as Holiday Village, which secures a mortgage loan representing 1.6% of the outstanding pool balance as of the cut-off date, among other legal non-conformities, the use of such property as a manufactured housing community is permitted in its zoning district only as part of a planned area development.  If the Holiday Village mortgaged property was not used as a manufactured housing community for a period of one (1) year or more, such use could only be re-established with planned unit development approval.  Such non-permitted uses are not covered by law and ordinance insurance.
 
With respect to the mortgaged property identified on Annex A-1 to this prospectus supplement as Hartman Portfolio, which secures a mortgage loan representing approximately 6.0% of the outstanding pool balance as of the cut-off date, the property zoning reports provided on May 6, 2011 for the Northbelt Atrium I and Northbelt Atrium II properties show multiple outstanding fire code violations found by the Harris County Fire Marshall.
 
In addition, certain of the mortgaged properties may be subject to certain restrictions and/or operational requirements imposed pursuant to restrictive covenants, reciprocal easement agreements or operating agreements or historical landmark designations or, in the case of those mortgaged properties that are condominiums, condominium declarations or other condominium use restrictions or regulations especially in a situation where the mortgaged property does not represent the entire condominium building.  Such use restrictions could include, for example, limitations on the use or character of the improvements or the properties, limitations affecting noise and parking requirements, among other things, and limitations on borrowers’ rights 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 such borrower’s ability to fulfill its obligations under the related mortgage loan.  See “—Condominium Properties Have Special Risks” in this prospectus supplement.
 
Risks Related to Litigation and Condemnation
 
There may be pending or threatened legal proceedings against the borrowers and managers of the mortgaged properties and their respective affiliates related to the business of or arising outside the ordinary business of the borrowers, managers and affiliates, which litigation or proceedings could cause a delay or inability in the related borrower’s or loan sponsor’s ability to meet its obligations under the related mortgage loan or otherwise in respect of the related mortgaged property or threaten a loan sponsor’s financial condition or control of the related borrower.  Such litigation could have a material adverse effect upon the related mortgage loans and could cause a delay in the distributions on your certificates or a mortgage loan default.  Therefore, we cannot assure you that this type of litigation will not have a material adverse effect on your certificates.
 
For example, in the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Union Square Retail, which secures a mortgage loan that represents 8.0% of the outstanding pool balance as of the cut-off date, the related borrower holds a leasehold interest in that property as tenant under a ground lease as to which there is ongoing litigation between the related borrower and the ground lessors.  See “—Mortgage Loans Secured by Leasehold Interests May Expose Investors to Greater Risks of Default and Loss” above.  The Related Companies, L.P., an indirect equity owner in the related borrower, has provided a payment guaranty that covers, among other things, the inability of the related borrower to repay the Union Square Retail mortgage loan for various reasons related to that litigation.  The Related Companies, L.P. is a named defendant in three separate ongoing actions involving claims aggregating over $300 million allegedly owing by The Related Companies, L.P. under payment guarantees and a completion guaranty related to other properties.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Brea Plaza Shopping Center, which secures a mortgage loan that represents 4.6% of the outstanding pool balance as of the cut-off date, there is currently litigation pending against the spouse of one of the key principals of the related borrower resulting from a full recourse guaranty such spouse provided to a
 
 
S-89

 
 
bankrupt unrelated property.  Such spouse had previously owned an indirect interest in the related property, but sold such indirect interest to the affected key principal for consideration.   If there is a judgment against the spouse relating to the full recourse guaranty, the plaintiffs may pursue a claim against the key principal’s economic interest in the related borrower as a marital asset and/or pursue other claims related to the transfer of the indirect interest in the related property to the key principal.
 
From time to time, there may be condemnations pending or threatened against one or more of the mortgaged properties securing the mortgage loans.  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 assure you that the occurrence of any condemnation will not have a negative impact upon distributions on your certificates.
 
Prior Bankruptcies, Defaults or Other Proceedings May Be Relevant to Future Performance
 
Certain of the borrowers, principals of borrowers, property managers and affiliates thereof have been a party to bankruptcy proceedings, mortgage loan defaults and restructurings, discounted payoffs, foreclosure proceedings or deed-in-lieu of foreclosure transactions, or other material proceedings (including criminal proceedings) in the past.  In some cases, mortgaged properties securing certain of the mortgage loans previously secured other loans that had been in default, restructured or the subject of a discounted payoff, foreclosure or deed-in-lieu of foreclosure.  Except as disclosed below, we are not aware of any borrower or principal of the borrower that has filed (or a sponsor that caused an entity under its control to file) for bankruptcy protection within the last ten years.
 
In the case of the mortgaged property identified on Annex A-1 to this prospectus supplement as Hickory Glen Apartments, which secures a mortgage loan that represents 1.0% of the outstanding pool balance as of the cut-off date, in September 2006, the sponsor of the related borrower caused an entity under the sponsor’s control to file for voluntary bankruptcy protection in connection with a dispute over the sale of certain property owned by such entity.  The property subject to such dispute was subsequently sold in June of 2008 and the mortgage loan related to such property was paid off in full.
 
In addition, borrowers, principals of borrowers, property managers and affiliates thereof may, in the future, be involved in bankruptcy proceedings, foreclosure proceedings or other material proceedings (including criminal proceedings).  There can be no assurance that any such proceedings will not negatively impact a borrower’s or sponsor’s ability to meet its obligations under the related mortgage loan.  Such proceedings could have a material adverse effect upon distributions on your certificates.
 
If a borrower or a principal of a borrower or affiliate has been a party to a bankruptcy, foreclosure or other proceeding or has been convicted of a crime in the past, we cannot assure you that the borrower or principal will not be more likely than other borrowers or principals to avail itself or cause a borrower to avail itself of its legal rights, under the Bankruptcy Code or otherwise, in the event of an action or threatened action by the mortgagee or its servicer to enforce the related mortgage loan documents, or otherwise conduct its operations in a manner that is in the best interests of the lender and/or the mortgaged property.  We cannot assure you that any such proceedings or actions will not have a material adverse effect upon distributions on your certificates.
 
Often it is difficult to confirm the identity of owners of 20% or less of the equity in a borrower, which means that past issues may not be discovered as to such owners.
 
Risks Relating to Costs of Compliance with Applicable Laws and Regulations
 
A borrower may be required to incur costs to comply with various existing and future federal, state or local laws and regulations applicable to the related mortgaged property, such as zoning laws and the Americans with Disabilities Act of 1990, as amended, which requires all public accommodations to meet certain federal requirements related to access and use by persons with disabilities.  See “Certain Legal Aspects of Mortgage Loans—Americans with Disabilities Act” in the prospectus.  The expenditure of
 
 
S-90

 
 
these costs or the imposition of injunctive relief, penalties or fines in connection with the borrower’s noncompliance could negatively impact the borrower’s cash flow and, consequently, its ability to pay its mortgage loan.
 
RISKS RELATED TO CONFLICTS OF INTEREST
 
Potential Conflicts of Interest of the Master Servicer and the Special Servicer
 
The pooling and servicing agreement provides that the mortgage loans are required to be administered in accordance with the servicing standard without regard to ownership of any certificate by the master servicer or special servicer or any of their respective affiliates.  See “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans; Collection of Payments” in this prospectus supplement.
 
Notwithstanding the foregoing, the master servicer, a subservicer, the special servicer or any of their respective affiliates may have interests when dealing with the mortgage loans that are in conflict with those of holders of the certificates, especially if the master servicer, a subservicer, the special servicer or any of their respective affiliates holds certificates, or has financial interests in, or other financial dealings with, a borrower or a loan sponsor.  Each of these relationships may create a conflict of interest.  For instance, if the special servicer or its affiliate holds a subordinate class of certificates, the special servicer might seek to reduce the potential for losses allocable to those certificates from the mortgage loans by deferring acceleration in hope of maximizing future proceeds.  However, that action could result in less proceeds to the issuing entity than would be realized if earlier action had been taken.  In general, no servicer is required to act in a manner more favorable to the certificates or any particular class of certificates.
 
Each of the master servicer and the special servicer services and is expected to continue to service, in the ordinary course of its business, existing and new loans for third parties, including portfolios of loans similar to the mortgage loans.  The real properties securing these other loans may be in the same markets as, and compete with, certain of the mortgaged properties securing the mortgage loans.  Consequently, personnel of the master servicer or special servicer, as applicable, may perform services, on behalf of the issuing entity, with respect to the mortgage loans at the same time as they are performing services, on behalf of other persons, with respect to other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans.  This may pose inherent conflicts for the master servicer or the special servicer.
 
Each of the foregoing relationships should be considered carefully by you before you invest in any offered certificates.
 
Special Servicer May Be Directed to Take Actions
 
In connection with the servicing of the specially serviced loans, the special servicer may, at the direction of the directing holder, take actions with respect to the specially serviced loans that could adversely affect the holders of some or all of the classes of certificates.  The directing holder (except, in the case of the Hartman Portfolio mortgage loan, to the extent the directing holder is the holder of the Class HP certificates) will be controlled by the controlling class certificateholders.  The directing holder may have interests in conflict with those of all of some of the other certificateholders.  As a result, it is possible that the directing holder may influence the special servicer to take actions that conflict with the interests of certain classes of the certificates.  However, the special servicer is not permitted to take actions that are prohibited by law or violate the servicing standard or the terms of the mortgage loan documents.  In addition, except as limited by certain conditions described under “The Servicers—Replacement of the Special Servicer,” for so long as a Control Termination Event is not continuing, the special servicer may be removed without cause by the directing holder, and, for so long as a Control Termination Event is continuing, the special servicer may be removed in accordance with procedures set forth under “The Servicers—Replacement of the Special Servicer” without cause at the direction of the holders of certificates (other than the Class X-A, Class X-B, Class X-ALA, Class R, Class LR, Class HP
 
 
S-91

 
 
and Class V certificates) evidencing 75% of the aggregate voting rights (taking into account the application of any appraisal reduction amounts to notionally reduce the certificate balances of the certificates) of all those certificates or evidencing more than 50% of each class of “non-reduced certificates” (each class of certificates (other than the Class X-A, Class X-B, Class X-ALA, Class R, Class LR, Class HP and Class V certificates) outstanding that has not been reduced to less than 25% of its initial certificate balance through the application of appraisal reduction amounts and realized losses).  See “The Pooling and Servicing Agreement—The Directing Holder,” and “The Servicers—Replacement of the Special Servicer” in this prospectus supplement.  It is expected that CPUSI Co-Investment SS Securities, LLC will be the initial directing holder with respect to each mortgage loan.
 
In addition, in certain circumstances with respect to each mortgage loan, following a Control Termination Event as described under “The Pooling and Servicing Agreement—The Operating Advisor” in this prospectus supplement, the special servicer will be required to consult with the operating advisor and, in addition, the operating advisor may recommend the removal or replacement of the special servicer if the operating advisor determines that the special servicer is not performing its duties as required under the pooling and servicing agreement or is otherwise not acting in accordance with the servicing standard.  As a result, it is possible that the directing holder or the operating advisor may influence the special servicer to take actions that conflict with the interests of certain classes of the certificates.  However, the special servicer is not permitted to take actions that are prohibited by law or violate the servicing standard or the terms of the mortgage loan documents.
 
CWCAM may enter into one or more arrangements with the Directing Holder, the Controlling Class Representative, a Controlling Class Certificateholder or other Certificateholders (or an affiliate or a third-party representative of one or more of the preceding) or any person who has the right to replace the Special Servicer to provide for a discount and/or revenue sharing with respect to certain of the Special Servicer compensation in consideration of, among other things, the appointment (or continuance) of CWCAM as Special Servicer under the Pooling and Servicing Agreement and limitations on the right of such person to replace CWCAM as the Special Servicer.
 
You will be acknowledging and agreeing, by your purchase of certificates, that the directing holder: (i) may take or refrain from taking actions that favor the interests of the directing holder over the certificateholders; (ii) may have special relationships and interests that conflict with the interests of the certificateholders and (iii) will not be liable by reason of its having so acted or refrained from acting solely in the interests of the directing holder and that no certificateholder may take any action against the directing holder or any of its officers, directors, employees, principals or agents as a result of such a special relationship or conflict.
 
Potential Conflicts of Interest of the Operating Advisor
 
Park Bridge Lender Services LLC, an affiliate of Park Bridge Financial LLC, has been appointed as the initial operating advisor.  See “The Operating Advisor” in this prospectus supplement.  With respect to each mortgage loan, if a Control Termination Event has occurred and is continuing, the operating advisor will be required to consult with the special servicer with respect to certain actions of the special servicer.  Additionally, with respect to each mortgage loan, if a Control Termination Event has occurred and is continuing, the master servicer or the special servicer, as applicable, will be required to use commercially reasonable efforts consistent with the servicing standard to collect an operating advisor consulting fee from the related borrower in connection with any major decision, to the extent not prohibited by the related mortgage loan documents.  The operating advisor is required to act solely on behalf of the issuing entity, in the best interest of, and for the benefit of, the certificateholders (as a collective whole as if such certificateholders constituted a single lender).  See “The Pooling and Servicing Agreement—The Operating Advisor” in this prospectus supplement.
 
 
S-92

 
 
Notwithstanding the foregoing, the operating advisor and its affiliates may have interests that are in conflict with those of certificateholders, especially if the operating advisor or any of its affiliates holds certificates or has financial interests in or other financial dealings with a borrower or a parent of a borrower.  Furthermore, affiliates of the operating advisor may, from time to time, represent borrowers of loans that are not assets of the trust in restructuring discussions with various special servicers of commercial mortgage securitization transactions (including CWCapital Asset Management LLC) where Park Bridge is not the operating advisor.  Each of these relationships may create a conflict of interest.
 
Additionally, the operating advisor or its affiliates may, in the future, service, in the ordinary course of its business, existing and new mortgage loans for third parties, including portfolios of loans similar to the mortgage loans that will be included in the issuing entity.  The real properties securing these other mortgage loans may be in the same markets as, and compete with, certain of the real properties securing the mortgage loans that will be included in the issuing entity.  Consequently, personnel of the operating advisor may perform services, on behalf of the issuing entity, with respect to the mortgage loans held by the issuing entity at the same time as they are performing services, on behalf of other persons, with respect to other mortgage loans secured by properties that compete with the mortgaged properties securing the mortgage loans held by the issuing entity.  This may pose inherent conflicts for the operating advisor.
 
Potential Conflicts of Interest of the Underwriters and Their Affiliates
 
The activities of the underwriters and their respective affiliates may result in certain conflicts of interest.  The underwriters and their respective affiliates may retain, or own in the future, classes of the offered certificates, and any voting rights of that class could be exercised by them in a manner that could adversely impact the offered certificates.  Any of the underwriters and their affiliates may invest or take long or short positions in securities or instruments, including the offered certificates, that may be different from your position as an investor in your certificates.  If that were to occur, the interests of that underwriter or its affiliates may not be aligned with your interests in the offered certificates you acquire.
 
The underwriters and their respective affiliates include broker-dealers whose business includes executing securities and derivative transactions on their own behalf as principals and on behalf of clients.  Accordingly, the underwriters and their respective affiliates and various clients acting through them from time to time buy, sell or hold securities or other instruments, which may include one or more classes of the offered certificates, and do so without consideration of the fact that the underwriters acted as underwriters for the offered certificates.  Such transactions may result in underwriters and their respective affiliates and/or their clients having long or short positions in such instruments.  Any such short positions will increase in value if the related securities or other instruments decrease in value.  Further, underwriters and their respective affiliates may (on their own behalf as principals or for their clients) enter into credit derivative or other derivative transactions with other parties pursuant to which they sell or buy credit protection with respect to one or more classes of the offered certificates.  The positions of the underwriters and their respective affiliates or their clients in such derivative transactions may increase in value if the offered certificates default or decrease in value.  In conducting such activities, none of the underwriters or their respective affiliates will have any obligation to take into account the interests of the certificateholders or any possible effect that such activities could have on them.  The underwriters and their respective affiliates and clients acting through them may execute such transactions, modify or terminate such derivative positions and otherwise act with respect to such transactions, and may exercise or enforce, or refrain from exercising or enforcing, any or all of their rights and powers in connection therewith, without regard to whether any such action might have an adverse effect on the offered certificates or the certificateholders.  Additionally, none of the underwriters or their respective affiliates will have any obligation to disclose any of these securities or derivatives transactions to you in your capacity as a certificateholder.
 
In addition, the underwriters and their respective affiliates will have no obligation to monitor the performance of the offered certificates or the actions of the master servicer, the special servicer, the certificate administrator, the operating advisor or the trustee and will have no authority to advise the
 
 
S-93

 
 
master servicer, the special servicer, the certificate administrator, the operating advisor or the trustee or to direct their actions.
 
Furthermore, the underwriters and their respective affiliates may have ongoing relationships with, render services to, and engage in transactions with the borrowers, the loan sponsors, tenants at the mortgaged properties and their respective affiliates, which relationships and transactions may create conflicts of interest between the underwriters and their respective affiliates, on the one hand, and the issuing entity, on the other hand.  German American Capital Corporation and its affiliates are playing several roles in this transaction.  Deutsche Bank Securities Inc., one of the underwriters, is an affiliate of Deutsche Mortgage & Asset Receiving Corporation, the depositor, Deutsche Bank Trust Company Americas, the certificate administrator and 17g-5 information provider, and German American Capital Corporation, a mortgage loan seller and a sponsor.  Ladder Capital Securities LLC, one of the underwriters, is an affiliate of (i) Ladder Capital Finance LLC, a mortgage loan seller and a sponsor, and (ii) the borrower under the mortgage loan secured by the mortgaged property identified on Annex A-1 as BJ’s Wholesale Pittsfield, which mortgage loan represents 1.2% of the outstanding pool balance as of the cut-off date.  In addition, Guggenheim Securities, LLC, one of the underwriters, is an affiliate of Guggenheim Life and Annuity Company, a mortgage loan seller and a sponsor.
 
See “Summary—Relevant Parties and Dates—Affiliates and Other Relationships” and “Certain Relationships and Related Transactions” in this prospectus supplement for a description of certain affiliations and relationships between the underwriters and other participants in this offering.
 
Each of the foregoing relationships should be considered carefully by you before you invest in any certificates.
 
Potential Conflicts of Interest in the Selection of the Underlying Mortgage Loans
 
CPUSI Co-Investment SS Securities, LLC (the “B-Piece Buyer”), the anticipated investor in the Class E, Class F and Class G certificates, was given the opportunity by the sponsors to perform due diligence on the mortgage loans originally identified by the sponsors for inclusion in the issuing entity, and to request the removal, re-sizing or change in the expected repayment dates or other features of some or all of the assets.  The asset pool as originally proposed by the sponsors was adjusted based on some of these requests.
 
We cannot assure you that you or another investor would have made the same requests to modify the original pool as the B-Piece Buyer or that the final pool as influenced by the B-Piece Buyer’s feedback will not adversely affect the performance of your certificates and benefit the performance of the B-Piece Buyer’s certificates.  Because of the differing subordination levels, the B-Piece Buyer has interests that may, in some circumstances, differ from those of purchasers of other classes of certificates, and may desire a portfolio composition that benefits the B-Piece Buyer but that does not benefit other investors.  In addition, the B-Piece Buyer may enter into hedging or other transactions or otherwise have business objectives that also could cause its interests with respect to the asset pool to diverge from those of other purchasers of the certificates.  The B-Piece Buyer performed due diligence solely for its own benefit.  The B-Piece Buyer has no liability to any person or entity for conducting its due diligence.  The B-Piece Buyer is not required to take into account the interests of any other investor in the certificates in exercising remedies or voting or other rights in its capacity as owner of the certificates it holds or in making requests or recommendations to the sponsors as to the selection of the mortgage loans and the establishment of other transaction terms.  Investors are not entitled to rely on in any way the B-Piece Buyer’s acceptance of a mortgage loan.  The B-Piece Buyer’s acceptance of a mortgage loan does not constitute and may not be construed as an endorsement of such mortgage loan, the underwriting for such mortgage loan or the originator of such mortgage loan.
 
The B-Piece Buyer or its designee will constitute the initial directing holder with respect to the mortgage loans (other than with respect to the Hartman Portfolio mortgage loan) and thus would have certain rights to direct and consult with the special servicer as described under “The Pooling and Servicing Agreement—The Directing Holder” in this prospectus supplement.
 
 
S-94

 
 
Because the incentives and actions of the B-Piece Buyer may, in some circumstances, differ from or be adverse to those of purchasers of other classes of certificates, you are advised and encouraged to make your own investment decision based on a careful review of the information set forth in this prospectus supplement and your own view of the asset pool.
 
Related Parties May Acquire Certificates or Experience Other Conflicts
 
Related Parties’ Ownership of Certificates May Impact the Servicing of the Mortgage Loans and Affect Payments under the Certificates
 
Affiliates of the depositor, the mortgage loan sellers, the master servicer or the special servicer may purchase a portion of the certificates.  The purchase of certificates could cause a conflict between the master servicer’s or the special servicer’s duties to the issuing entity under the pooling and servicing agreement and its interests as a holder of a certificate.  In addition, as described under “The Servicers—Replacement of the Special Servicer,” the directing holder generally has certain rights to remove the special servicer and appoint a successor, which may be an affiliate of such holder.  However, the pooling and servicing agreement provides that the mortgage loans are required to be administered in accordance with the servicing standard without regard to ownership of any certificate by the master servicer, the special servicer or any of their affiliates.  See “The Pooling and Servicing Agreement—Servicing of the Mortgage Loans; Collection of Payments” in this prospectus supplement.
 
Additionally, the master servicer or the special servicer may, especially if it or an affiliate holds a subordinate certificate, or has financial interests in or other financial dealings with a borrower or loan sponsor under any of the mortgage loans, have interests when dealing with the mortgage loans that are in conflict with those of holders of the certificates offered in this prospectus supplement.  In addition, for instance, if the special servicer or an affiliate holds a subordinate certificate, the special servicer could seek to reduce the potential for losses allocable to those certificates from a troubled mortgage loan by deferring acceleration in hope of maximizing future proceeds.  The special servicer might also seek to reduce the potential for such losses by accelerating a mortgage loan earlier than necessary in order to avoid advance interest or additional expenses of the issuing entity.  Either action could result in fewer proceeds to the issuing entity than would be realized if alternate action had been taken.  In general, the servicers are not required to act in a manner more favorable to the certificates offered in this prospectus supplement or any particular class of certificates that are subordinate to the certificates offered in this prospectus supplement.
 
German American Capital Corporation, one of the mortgage loan sellers and a sponsor, is an affiliate of Deutsche Mortgage & Asset Receiving Corporation, the depositor, and of Deutsche Bank Securities Inc., an underwriter.  These affiliations and the matters described in the two preceding paragraphs could cause conflicts with the duties of a servicer to the issuing entity under the pooling and servicing agreement. With respect to the duties of the master servicer, the pooling and servicing agreement provides that the mortgage loans shall be administered in accordance with the servicing standards described in this prospectus supplement without regard to an affiliation with a mortgage loan seller, any other party to the pooling and servicing agreement or any of their affiliates.  See “The Pooling and Servi