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Bank of America Merrill Lynch Commercial Mortgage Trust 2015-UBS7

Filed: 7 Sep 15, 8:00pm

 

  FREE WRITING PROSPECTUS
  FILED PURSUANT TO RULE 433
  REGISTRATION FILE NO.: 333-201743-01
   

The information in this free writing prospectus may be amended and/or supplemented prior to the time of sale. The information in this free writing prospectus supersedes any contrary information contained in any prior free writing prospectus relating to the subject securities and will be superseded by any contrary information contained in any subsequent free writing prospectus prior to the time of sale. In addition, certain information regarding the subject securities is not yet available and, accordingly, has not been included in this free writing prospectus.

 

STATEMENT REGARDING THIS FREE WRITING PROSPECTUS

 

The depositor has filed a registration statement (including a prospectus) with the SEC (File Number 333-201743) for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus in the registration statement and other documents the depositor has filed with the SEC for more complete information about the depositor, the issuing entity and this offering. You may get these documents for free by visiting EDGAR on the SEC website athttp://www.sec.gov. Alternatively, the depositor, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll free 1-800-294-1322 or by email todg.Prospectus_Requests@baml.com.

 

This free writing prospectus does not contain all information that is required to be included in the prospectus and the prospectus supplement.

 

THIS FREE WRITING PROSPECTUS DATED SEPTEMBER 8, 2015 MAY BE AMENDED OR SUPPLEMENTED PRIOR TO THE TIME OF SALE

 

$703,324,000 (Approximate)

 

Banc of America Merrill Lynch Commercial Mortgage Inc. 

Depositor

 

UBS Real Estate Securities Inc.
Bank of America, National Association 

Sponsors and Mortgage Loan Sellers

 

Bank of America Merrill Lynch Commercial Mortgage Trust 2015-UBS7 

Issuing Entity

 

Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7

 

 

 

   
 Consider carefully the risk factors beginning on page S-57 in this free writing prospectus and page 9 in the attached prospectus. 
   
 Neither the certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency. 
   
 The certificates will represent interests only in the issuing entity and will not represent interests in or obligations of the depositor, Bank of America, National Association, or any of their affiliates, including Bank of America Corporation. 

 

The Bank of America Merrill Lynch Commercial Mortgage Trust 2015-UBS7, Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7 will consist of the following classes:

 

senior certificates consisting of the Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR certificates;
subordinate certificates consisting of the Class A-S, Class B, Class C, Class D, Class E, Class F, Class G and Class H certificates;
the Class V certificates representing the right to receive certain payments of excess interest received with respect to mortgage loans having anticipated repayment dates; and
the residual certificates consisting of the Class R certificates.

 

Only the Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class A-S, Class B, Class C and Class D certificates are offered hereby.

 

Distributions on the offered certificates will occur monthly, commencing in October 2015, to the extent of available funds, as described in this free writing prospectus under “Description of the Offered Certificates—Distributions.” The mortgage loans constitute the sole source of repayment on the offered certificates.

 

The issuing entity’s assets will consist primarily of forty-two (42) fixed rate mortgage loans and other property described in this free writing prospectus and the attached prospectus. The mortgage loans are secured by first liens on fifty-seven (57) commercial, multifamily and manufactured housing community properties. This free writing prospectus more fully describes the offered certificates, as well as the characteristics of the mortgage loans and the related mortgaged properties. The only credit support for any class of offered certificates will be provided by the subordination of the class(es), if any, that have a lower payment priority as described in this free writing prospectus under “Description of the Offered Certificates—Distributions—Subordination; Allocation of Collateral Support Deficit.”



Certain characteristics of the offered certificates include:

 

ClassExpected Ratings
(Fitch/KBRA/Moody’s/Morningstar)
Approximate Initial
Certificate Principal Balance or Notional Amount
Approximate
Initial
Pass-Through Rate
Pass-Through
Rate Description
Expected Final Distribution Date

Rated Final

Distribution Date

Class A-1AAAsf/AAA(sf)/Aaa(sf)/AAA$38,700,000 % September 2020September 2048
Class A-SBAAAsf/AAA(sf)/Aaa(sf)/AAA$62,400,000 % June 2025September 2048
Class A-3AAAsf/AAA(sf)/Aaa(sf)/AAA$200,000,000 % August 2025September 2048
Class A-4AAAsf/AAA(sf)/Aaa(sf)/AAA$228,996,000 % September 2025September 2048
Class X-AAAAsf/AAA(sf)/Aaa(sf)/AAA$530,096,000 %VariableSeptember 2025September 2048
Class X-BAAAsf/AAA(sf)/Aa2(sf)/AAA$50,170,000 %VariableSeptember 2025September 2048
Class X-DBBB-sf/BBB-(sf)/NR/AAA$39,879,000 %VariableSeptember 2025September 2048
Class A-SAAAsf/AAA(sf)/Aa2(sf)/AAA$50,170,000 % September 2025September 2048
Class BAA-sf/AA-(sf)/NR/AA-$50,169,000 % September 2025September 2048
Class CA-sf/A-(sf)/NR/A-$33,010,000 % September 2025September 2048
Class DBBB-sf/BBB-(sf)/NR/BBB-$39,879,000 % September 2025September 2048

 

(Explanatory notes to this table start on page S-1)

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these offered securities or determined if this free writing prospectus or the attached prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC and Drexel Hamilton, LLC, the underwriters, will purchase the certificates offered to you from Banc of America Merrill Lynch Commercial Mortgage Inc. and will offer them to the public in one or more negotiated transactions, or otherwise, at varying prices determined at the time of sale. The offered certificates are offered by the underwriters when, as and if issued by the issuing entity and delivered to and accepted by the underwriters and subject to their right to reject orders in whole or in part. The underwriters expect to deliver the offered certificates to purchasers on or about September 24, 2015.

 

 

 

BofA Merrill Lynch UBS Securities LLC
 Drexel Hamilton 
 September    , 2015 

 

 
 

 

(MAP)

 

 
 

 

The information in this free writing prospectus is preliminary and may be supplemented or amended. The information in this free writing prospectus, if conveyed prior to the time of your commitment to purchase, supersedes information contained in any prior free writing prospectus relating to these securities. This free writing prospectus is not an offer to sell or a solicitation of an offer to buy these securities in any jurisdiction where such offer, solicitation or sale is not permitted. The securities referred to in this free writing prospectus are being offered when, as and if issued. Our obligation to sell securities to you is conditioned on the securities having the characteristics described in this free writing prospectus. If that condition is not satisfied, we will notify you, and neither the depositor nor any underwriter will have any obligation to you to deliver all or any portion of the securities which you have committed to purchase, and there will be no liability between us as a consequence of the non-delivery.

 

IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
FREE WRITING PROSPECTUS AND THE ATTACHED PROSPECTUS

 

Information about the certificates offered to you is contained in two (2) separate documents that progressively provide more detail: (a) the prospectus attached hereto as Exhibit A, which provides general information, some of which may not apply to the certificates offered to you; and (b) this free writing prospectus, which describes the specific terms of the certificates offered to you. You should read both this free writing prospectus and the attached prospectus in full to obtain material information concerning the offered certificates.

 

You should rely only on the information contained in this free writing prospectus and the attached prospectus. Banc of America Merrill Lynch Commercial Mortgage Inc. has not authorized anyone to provide you with information that is different from that contained in this free writing prospectus and the attached prospectus.

 

 

 

This free writing prospectus and the attached prospectus include cross references to sections in these materials where you can find further related discussions. The tables of contents in this free writing prospectus and the attached prospectus identify the pages where these sections are located. You should read both this free writing prospectus and the attached prospectus in full to obtain material information concerning the offered certificates. When reading the attached prospectus in conjunction with this free writing prospectus, references in the attached prospectus to “prospectus supplement” should be read as references to this free writing prospectus.

 

The appendices attached to this free writing prospectus are hereby incorporated into and made a part of this free writing prospectus.

 

This free writing prospectus and the attached prospectus do not constitute an offer to sell or a solicitation of an offer to buy any security other than the offered certificates, nor do they constitute an offer to sell or a solicitation of an offer to buy any of the offered certificates to any person in any jurisdiction in which it is unlawful to make such an offer or solicitation to such person.

 

In this free writing prospectus, the terms “depositor,” “we,” “our” and “us” refer to Banc of America Merrill Lynch Commercial Mortgage Inc.

 

 

 

The issuing entity will not be registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity will not be relying upon Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act as a basis for not registering under the Investment Company Act. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule (as defined in this free writing prospectus) under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

 

 

 

iii
 

 

NOTICE TO RESIDENTS WITHIN THE EUROPEAN ECONOMIC AREA

 

This free writing prospectus is not a prospectus for the purposes of the European Union’s Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) (the “EU Prospectus Directive”) as implemented in any Member State of the European Economic Area (each, a “Relevant Member State”). This free writing prospectus has been prepared on the basis that all offers of the offered certificates in any Relevant Member State will be made pursuant to an exemption under the EU Prospectus Directive from the requirement to produce a prospectus in connection with offers of the offered certificates. Accordingly, any person making or intending to make any offer in that Relevant Member State of offered certificates which are the subject of the offering contemplated in this free writing prospectus may only do so in circumstances in which no obligation arises for the depositor, the issuing entity or any of the underwriters to produce a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. None of the depositor, the issuing entity or the underwriters have authorized, and none of such entities authorizes, the making of any offer of the offered certificates in circumstances in which an obligation arises for the depositor, the issuing entity or the underwriters to publish a prospectus for such offer.

 

EUROPEAN ECONOMIC AREA SELLING RESTRICTIONS

 

In relation to each member state of the European Economic Area which has implemented the EU Prospectus Directive (each, a “Relevant Member State”), each underwriter has represented and agreed that, with effect from and including the date on which the EU Prospectus Directive is implemented in that Relevant Member State, it has not made and will not make an offer of the offered certificates which are the subject of the offering contemplated by this free writing prospectus to the public in that Relevant Member State other than:

 

(a) to any legal entity which is a “qualified investor” as defined in the EU Prospectus Directive;

 

(b) to fewer than 150 natural or legal persons (other than “qualified investors” as defined in the EU Prospectus Directive) subject to obtaining the prior consent of the relevant underwriter or underwriters nominated by the depositor for any such offer; or

 

(c) in any other circumstances falling within Article 3(2) of the EU Prospectus Directive;

 

provided, that no such offer of the offered certificates above shall require the issuing entity, the depositor or any underwriter to publish a prospectus pursuant to Article 3 of the EU Prospectus Directive.

 

For the purposes of the prior paragraph, (1) the expression an “offer of the offered certificates which are the subject of the offering contemplated by this free writing prospectus to the public” in relation to any offered certificate 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 to the offered certificates, as the same may be varied in that Relevant Member State by any measure implementing the EU Prospectus Directive in that Relevant Member State and (2) the expression “EU Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) and includes any relevant implementing measure in the Relevant Member State.

 

UNITED KINGDOM SELLING RESTRICTIONS

 

Each underwriter has represented and agreed, that:

 

(a) in the United Kingdom, it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of any offered certificates in circumstances in which Section 21(1) of the FSMA does not apply to the issuing entity or the depositor; and

 

(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the offered certificates in, from or otherwise involving the United Kingdom.

 

iv
 

 

NOTICE TO UNITED KINGDOM INVESTORS

 

THE DISTRIBUTION OF THIS FREE WRITING PROSPECTUS AND THE ACCOMPANYING PROSPECTUS IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (1) ARE OUTSIDE THE UNITED KINGDOM, OR (2) ARE INSIDE THE UNITED KINGDOM AND QUALIFY AS INVESTMENT PROFESSIONALS IN ACCORDANCE WITH ARTICLE 19(5) OR ARE PERSONS FALLING WITHIN ARTICLES 49(2)(A) THROUGH (D) (“HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC.”) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS THE “RELEVANT PERSONS”). THIS FREE WRITING PROSPECTUS AND THE ACCOMPANYING PROSPECTUS MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS FREE WRITING PROSPECTUS AND THE ACCOMPANYING PROSPECTUS RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS

 

HONG KONG

 

THE OFFERED CERTIFICATES MAY NOT BE OFFERED OR SOLD BY MEANS OF ANY DOCUMENT OTHER THAN (I) IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP. 32, LAWS OF HONG KONG), OR (II) TO “PROFESSIONAL INVESTORS” WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571, LAWS OF HONG KONG) AND ANY RULES MADE THEREUNDER, OR (III) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT BEING A “PROSPECTUS” WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP. 32, LAWS OF HONG KONG), AND NO ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE OFFERED CERTIFICATES MAY BE ISSUED OR MAY BE IN THE POSSESSION OF ANY PERSON FOR THE PURPOSE OF ISSUE (IN EACH CASE WHETHER IN HONG KONG OR ELSEWHERE), WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO OFFERED CERTIFICATES WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO “PROFESSIONAL INVESTORS” WITHIN THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571, LAWS OF HONG KONG) AND ANY RULES MADE THEREUNDER.

 

SINGAPORE

 

THIS FREE WRITING PROSPECTUS HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE. ACCORDINGLY, THIS FREE WRITING PROSPECTUS AND ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE, OF THE OFFERED CERTIFICATES MAY NOT BE CIRCULATED OR DISTRIBUTED, NOR MAY THE OFFERED CERTIFICATES BE OFFERED OR SOLD, OR BE MADE THE SUBJECT OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE, WHETHER DIRECTLY OR INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE “SFA”), (II) TO A RELEVANT PERSON, OR ANY PERSON PURSUANT TO SECTION 275(1A), IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA OR (III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA.

 

WHERE THE OFFERED CERTIFICATES ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY A RELEVANT PERSON WHICH IS: (A) A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR; OR (B) A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY IS AN ACCREDITED INVESTOR, SHARES, DEBENTURES AND UNITS OF SHARES AND DEBENTURES OF

 

v
 

 

THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST IN THAT TRUST SHALL NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE OFFERED CERTIFICATES UNDER SECTION 275 EXCEPT: (1) TO AN INSTITUTIONAL INVESTOR UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON, OR ANY PERSON PURSUANT TO SECTION 275(1A) OF THE SFA, AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275 OF THE SFA; (2) WHERE NO CONSIDERATION IS GIVEN FOR THE TRANSFER; OR (3) BY OPERATION OF LAW.

 

JAPAN

 

THE OFFERED CERTIFICATES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE FINANCIAL INSTRUMENTS EXCHANGE ACT OF JAPAN (LAW NO. 25 OF 1948, AS AMENDED (THE “FIEL”)), AND EACH UNDERWRITER HAS AGREED THAT IT WILL NOT OFFER OR SELL ANY OFFERED CERTIFICATES, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY JAPANESE PERSON, OR TO OTHERS FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN JAPAN OR TO ANY JAPANESE PERSON, EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE FIEL AND ANY OTHER APPLICABLE LAWS AND REGULATIONS. FOR THE PURPOSES OF THIS PARAGRAPH, “JAPANESE PERSON” SHALL MEAN ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS AND REGULATIONS OF JAPAN.

 

NOTICE TO RESIDENTS OF THE PEOPLE’S REPUBLIC OF CHINA

 

THE OFFERED CERTIFICATES WILL NOT BE OFFERED OR SOLD IN THE PEOPLE’S REPUBLIC OF CHINA (EXCLUDING HONG KONG, MACAU AND TAIWAN, THE “PRC”) AS PART OF THE INITIAL DISTRIBUTION OF THE OFFERED CERTIFICATES BUT MAY BE AVAILABLE FOR PURCHASE BY INVESTORS RESIDENT IN THE PRC FROM OUTSIDE THE PRC.

 

THIS FREE WRITING PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN THE PRC TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN THE PRC.

 

THE PRC DOES NOT REPRESENT THAT THIS FREE WRITING PROSPECTUS MAY BE LAWFULLY DISTRIBUTED, OR THAT ANY OFFERED CERTIFICATES MAY BE LAWFULLY OFFERED, IN COMPLIANCE WITH ANY APPLICABLE REGISTRATION OR OTHER REQUIREMENTS IN THE PRC, OR PURSUANT TO AN EXEMPTION AVAILABLE THEREUNDER, OR ASSUME ANY RESPONSIBILITY FOR FACILITATING ANY SUCH DISTRIBUTION OR OFFERING. IN PARTICULAR, NO ACTION HAS BEEN TAKEN BY THE PRC WHICH WOULD PERMIT AN OFFERING OF ANY OFFERED CERTIFICATES OR THE DISTRIBUTION OF THIS FREE WRITING PROSPECTUS IN THE PRC. ACCORDINGLY, THE OFFERED CERTIFICATES ARE NOT BEING OFFERED OR SOLD WITHIN THE PRC BY MEANS OF THIS FREE WRITING PROSPECTUS OR ANY OTHER DOCUMENT. NEITHER THIS FREE WRITING PROSPECTUS NOR ANY ADVERTISEMENT OR OTHER OFFERING MATERIAL MAY BE DISTRIBUTED OR PUBLISHED IN THE PRC, EXCEPT UNDER CIRCUMSTANCES THAT WILL RESULT IN COMPLIANCE WITH ANY APPLICABLE LAWS AND REGULATIONS.

 

NOTICE TO RESIDENTS OF THE REPUBLIC OF KOREA

 

THIS FREE WRITING PROSPECTUS IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, A PUBLIC OFFERING OF SECURITIES IN KOREA. NEITHER THE ISSUER NOR ANY OF ITS AGENTS MAKE ANY REPRESENTATION WITH RESPECT TO THE ELIGIBILITY OF ANY RECIPIENTS OF THIS FREE WRITING PROSPECTUS TO ACQUIRE THE OFFERED CERTIFICATES UNDER THE LAWS OF KOREA, INCLUDING, BUT WITHOUT LIMITATION, THE FOREIGN EXCHANGE TRANSACTION LAW AND REGULATIONS THEREUNDER (THE “FETL”). THE OFFERED CERTIFICATES HAVE NOT BEEN REGISTERED WITH THE FINANCIAL SERVICES COMMISSION OF KOREA FOR PUBLIC OFFERING IN KOREA, AND NONE OF THE OFFERED CERTIFICATES MAY BE

 

vi
 

 

OFFERED, SOLD OR DELIVERED, DIRECTLY OR INDIRECTLY, OR OFFERED OR SOLD TO ANY PERSON FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY IN KOREA OR TO ANY RESIDENT OF KOREA EXCEPT PURSUANT TO THE FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT AND THE DECREES AND REGULATIONS THEREUNDER (THE “FSCMA”), THE FETL AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES IN KOREA. WITHOUT PREJUDICE TO THE FOREGOING, THE NUMBER OF OFFERED CERTIFICATES OFFERED IN KOREA OR TO A RESIDENT OF KOREA SHALL BE LESS THAN FIFTY AND FOR A PERIOD OF ONE YEAR FROM THE ISSUE DATE OF THE OFFERED CERTIFICATES, NONE OF THE OFFERED CERTIFICATES MAY BE DIVIDED RESULTING IN AN INCREASED NUMBER OF OFFERED CERTIFICATES. FURTHERMORE, THE OFFERED CERTIFICATES MAY NOT BE RESOLD TO KOREAN RESIDENTS UNLESS THE PURCHASER OF THE OFFERED CERTIFICATES COMPLIES WITH ALL APPLICABLE REGULATORY REQUIREMENTS (INCLUDING, BUT NOT LIMITED TO, GOVERNMENT REPORTING APPROVAL REQUIREMENTS UNDER THE FETL AND ITS SUBORDINATE DECREES AND REGULATIONS) IN CONNECTION WITH THE PURCHASE OF THE OFFERED CERTIFICATES.

 

vii
 

 

Note regarding pie chart and map on opposite page: numbers may not total to 100% due to rounding

 

    
 For more information 
   
 Banc of America Merrill Lynch Commercial Mortgage Inc. has filed with the SEC additional registration materials relating to the certificates. You may read and copy any of these materials at the SEC’s Public Reference Room at the following location: 
   
 SEC Public Reference Section 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. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information that has been filed electronically with the SEC. The Internet address ishttp://www.sec.gov. 
   
 You may also contact Banc of America Merrill Lynch Commercial Mortgage Inc. in writing at One Bryant Park, New York, New York 10036, or by telephone at (980) 388-7451. 
   
 See also the sections captioned “AVAILABLE INFORMATION” and “INCORPORATION OF CERTAIN INFORMATION BY REFERENCE” appearing at the end of the attached prospectus. 
   
 The file number of the registration statement to which this free writing prospectus relates is 333-201743. 
   

 

  
TABLE OF CONTENTS
EXECUTIVE SUMMARYS-1
SUMMARY OF FREE WRITING PROSPECTUSS-4
RISK FACTORSS-57
General RisksS-57
Risks Related to Market ConditionsS-57
Risks Related to the Mortgage LoansS-58
Risks Related to Conflicts of InterestS-102
Risks Related to the Offered CertificatesS-110
CAPITALIZED TERMS USED IN THIS FREE WRITING PROSPECTUSS-127
FORWARD LOOKING STATEMENTSS-127
TRANSACTION PARTIESS-128
The Sponsors, Mortgage Loan Sellers and OriginatorsS-128
The DepositorS-146
The Issuing EntityS-146
The Trustee, Certificate Administrator and CustodianS-147
The Trust AdvisorS-149
The Master ServicerS-150
The Special ServicerS-151
Other ServicersS-155
Affiliations and Certain RelationshipsS-155
DESCRIPTION OF THE OFFERED CERTIFICATESS-157
GeneralS-157
Certificate Principal Balances and Notional AmountsS-158
Pass-Through RatesS-160
AccountsS-162
DistributionsS-164
Optional TerminationS-183
AdvancesS-184
Appraisal ReductionsS-189
Reports to Certificateholders; Available InformationS-194
Example of DistributionsS-201
Expected Final Distribution Date; Rated Final Distribution DateS-202
Amendments to the Pooling and Servicing AgreementS-202
Evidence as to ComplianceS-204
Voting RightsS-205
Matters Regarding the Certificate AdministratorS-206
The TrusteeS-207
Certificateholder CommunicationsS-212
Retention of Certain Certificates by Affiliates of Transaction PartiesS-212
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONSS-213
GeneralS-213
Pass-Through RatesS-213
Rate and Timing of Principal PaymentsS-213
Yield on the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and
Class X-NR Certificates
S-215
Unpaid Distributable Certificate InterestS-215
Losses and ShortfallsS-215


viii
 

 

  
Relevant FactorsS-216
Weighted Average LifeS-216
Price/Yield TablesS-221
DESCRIPTION OF THE MORTGAGE POOLS-223
GeneralS-223
Material Terms and Characteristics of the Mortgage LoansS-224
The A/B Whole Loans and the Loan PairsS-237
The Non-Serviced Loan CombinationsS-250
Additional Mortgage Loan InformationS-267
Standard Hazard InsuranceS-274
Sale of the Mortgage LoansS-275
Representations and WarrantiesS-276
Repurchases and Other RemediesS-277
Changes In Mortgage Pool CharacteristicsS-279
SERVICING OF THE MORTGAGE LOANSS-280
GeneralS-280
The Master ServicerS-289
The Special ServicerS-295
Rating Agency ConfirmationsS-303
Waivers of Servicer Termination EventsS-304
Withdrawals from the Collection AccountS-305
Enforcement of “Due-On-Sale” and “Due-On-Encumbrance” ClausesS-305
InspectionsS-306
The Controlling Class RepresentativeS-307
The Trust AdvisorS-312
Certain Matters Regarding the Parties to the Pooling and Servicing AgreementS-320
Asset Status ReportsS-321
Mortgage Loan ModificationsS-322
Sale of Defaulted Mortgage Loans and REO PropertiesS-324
ForeclosuresS-327
Litigation ControlS-329
Additional Matters Relating to the Servicing of the Non-Serviced Mortgage LoansS-331
MATERIAL FEDERAL INCOME TAX CONSEQUENCESS-336
Tax Classification of the Issuing EntityS-337
Special Tax Attributes of the Offered CertificatesS-337
Taxation of the Offered CertificatesS-338
REMIC Administrative ProvisionsS-343
Taxes on a REMICS-343
Backup WithholdingS-344
STATE, LOCAL AND OTHER TAX CONSIDERATIONSS-344
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANSS-345
CERTAIN ERISA CONSIDERATIONSS-347
Plan Assets and Prohibited TransactionsS-347
Special Exemption Applicable to the Offered CertificatesS-348
Insurance Company General AccountsS-350
General Investment ConsiderationsS-350
LEGAL INVESTMENTS-351
LEGAL MATTERSS-351
RATINGSS-351
INDEX OF SIGNIFICANT TERMSS-354
  

 

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APPENDIX I - CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANSI-1
APPENDIX II - MORTGAGE POOL INFORMATION (TABLES)II-1
APPENDIX III - SIGNIFICANT LOAN SUMMARIESIII-1
APPENDIX IV - FORM OF DISTRIBUTION DATE STATEMENTIV-1
APPENDIX V - MORTGAGE LOAN REPRESENTATIONS AND WARRANTIESV-1
APPENDIX VI - EXCEPTIONS TO MORTGAGE LOAN REPRESENTATIONS AND WARRANTIESVI-1
APPENDIX VII - CLASS A-SB PLANNED PRINCIPAL BALANCEVII-1
APPENDIX VIII-A - CHARLES RIVER PLAZA NORTH AMORTIZATION SCHEDULEVIII-A-1
APPENDIX VIII-B – 200 HELEN STREET NOTE B -AMORTIZATION SCHEDULEVIII-B-1
  
EXHIBIT A - PROSPECTUSA-1

 

x
 

 

 

Executive Summary

 

This Executive Summary highlights selected information regarding the certificates. It does not contain all of the information you need to consider in making your investment decision. To understand all of the terms of this offering and the underlying mortgage loans, you should read this entire free writing prospectus and the prospectus attached hereto as Exhibit A carefully.

 

Certificate Structure

                  
Class Expected Ratings
(Fitch/KBRA/
Moody’s/Morningstar)
 Approximate
Initial Certificate Principal

Balance or
Notional Amount
 Approximate Initial Credit Support Approximate
 Initial
Pass-Through
Rate
 Expected Final Distribution Date Expected Weighted Average Life (yrs.) Principal Window (months)
Class A-1 AAAsf/AAA(sf)/Aaa(sf)/AAA $38,700,000  30.000%  % September 2020 2.80 1-60
Class A-SB AAAsf/AAA(sf)/Aaa(sf)/AAA $ 62,400,000  30.000%  % June 2025 7.61 60-117
Class A-3 AAAsf/AAA(sf)/Aaa(sf)/AAA $ 200,000,000  30.000%  % August 2025 9.85 117-119
Class A-4 AAAsf/AAA(sf)/Aaa(sf)/AAA $ 228,996,000  30.000%  % September 2025 9.94 119-120
Class X-A AAAsf/AAA(sf)/Aaa(sf)/AAA $ 530,096,000  N/A  % September 2025 N/A N/A
Class X-B AAAsf/AAA(sf)/Aa2(sf)/AAA $ 50,170,000  N/A  % September 2025 N/A N/A
Class X-D BBB-sf/BBB-(sf)/NR/AAA $ 39,879,000  N/A  % September 2025 N/A N/A
Class A-S AAAsf/AAA(sf)/Aa2(sf)/AAA $ 50,170,000  23.375%  % September 2025 9.98 120-120
Class B AA-sf/AA-(sf)/NR/AA- $ 50,169,000  16.750%  % September 2025 9.98 120-120
Class C A-sf/A-(sf)/NR/A- $ 33,010,000  12.391%  % September 2025 9.98 120-120
Class D BBB-sf/BBB-(sf)/NR/BBB- $ 39,879,000  7.125%  % September 2025 9.98 120-120
Class X-E BB-sf/BB(sf)/NR/AAA $ 17,038,000  N/A  % September 2025 N/A N/A
Class X-FG NR/NR/NR/AAA $ 15,146,000  N/A  % September 2025 N/A N/A
Class X-NR NR/NR/NR/AAA $ 21,772,331  N/A  % September 2025 N/A N/A
Class E BB-sf/BB(sf)/NR/BB- $ 17,038,000  4.875%  % September 2025 9.98 120-120
Class F B-sf/B+(sf)/NR/B $ 7,573,000  3.875%  % September 2025 9.98 120-120
Class G NR/B-(sf)/NR/B- $ 7,573,000  2.875%  % September 2025 9.98 120-120
Class H NR/NR/NR/NR $ 21,772,331  0.000%  % September 2025 9.98 120-120
Class V NR/NR/NR/NR  N/A  N/A N/A  N/A N/A N/A
Class R NR/NR/NR/NR  N/A  N/A N/A  N/A N/A N/A

 

 

 

 Offered certificates.
 Certificates not offered pursuant to this free writing prospectus.

 

When reviewing the table on the cover page of this free writing prospectus and the table above entitled “Certificate Structure,” please note the following:

   
 ·The certificate principal balances and notional amounts are approximate and on the closing date may vary by up to 5%. Mortgage loans may be removed from or added to the mortgage pool prior to the closing date within the same maximum permitted variance. Any reduction or increase in the aggregate principal balance of mortgage loans within these parameters will result in changes to the initial certificate principal balance or notional amount of each class of certificates (other than the Class V and Class R Certificates) and to the other statistical data contained in this free writing prospectus. In addition, the notional amounts of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates may vary depending upon the final pricing of the classes of principal balance certificates whose certificate principal balances comprise such notional amounts, and, if as a result of such pricing the pass-through rate of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, as applicable, would be equal to zero, such class of certificates will not be issued on the closing date of this securitization.
   
 ·The expected final distribution date for each class of certificates is the date on which that class is expected to be paid in full (or, in the case of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, the date on which the related notional amount is reduced to zero), based on the assumptions described in“Description of the Offered  Certificates—Expected Final Distribution Date; Rated Final Distribution Date”in this free writing prospectus. The rated final distribution date for each class of rated certificates is the distribution date in September 2048. See “Description of the Offered
   

 

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  Certificates—Expected Final Distribution Date; Rated Final Distribution Date” in this free writing prospectus.
   
 ·Each class of principal balance certificates will, at all times, accrue interest at aper annum rate equal to (i) a fixed rate, (ii) a fixed rate subject to a cap equal to the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) or (iii) a rate equal to the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) less a specified percentage, which percentage may be zero.
   
 ·Ratings shown are those of Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc. and Morningstar Credit Ratings, LLC. Certain nationally recognized statistical rating organizations that were not hired by the depositor may use information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended, to rate the certificates. There can be no assurance as to what ratings a non-hired nationally recognized statistical rating organization would assign. See “Risk Factors—Risks Related to the Offered Certificates—Ratings of the Offered Certificates Do Not Represent Any Assessment of the Yield to Maturity That a Certificateholder May Experience and Such Ratings May Be Reviewed, Revised, Suspended, Downgraded, Qualified or Withdrawn By the Applicable Rating Agency” and “Ratings” in this free writing prospectus. Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc. and Moody’s Investors Service, Inc. have informed us that the “sf” designation in their ratings represents an identifier for structured finance product ratings.
   
 ·The initial pass-through rates are approximate as of the closing date. The percentages indicated under the column “Approximate Initial Credit Support” with respect to the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates represent the approximate initial credit support for the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates, in the aggregate.
   
 ·The principal window is expressed in months following the closing date and reflects the period during which distributions of principal would be received under the assumptions set forth in the following sentence. The expected weighted average life and principal window figures set forth above are based on the following assumptions, among others: (i) no defaults or subsequent losses on the mortgage loans; (ii) no extensions of maturity dates of mortgage loans that do not have “anticipated repayment dates;” (iii) payment in full on the stated maturity date or, in the case of each mortgage loan having an anticipated repayment date, on the anticipated repayment date; and (iv) no prepayments of the mortgage loans prior to maturity or, in the case of a mortgage loan having an anticipated repayment date, prior to such anticipated repayment date. See the structuring assumptions set forth under “Yield, Prepayment and Maturity Considerations—Weighted Average Life” in this free writing prospectus.
   
 ·None of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G, Class H, Class V or Class R Certificates are offered pursuant to this free writing prospectus. We sometimes refer to these certificates collectively as the “privately offered certificates.”
   
 ·The Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates (collectively, the “Class X Certificates”) will not have certificate principal balances and will not be entitled to receive distributions of principal. Interest will accrue on the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates at their respective pass-through rates based upon their respective notional amounts. The notional amount of the Class X-A Certificates will be equal to the aggregate certificate principal balance of the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates outstanding from time to time. The notional amount of the Class X-B Certificates will be equal to the certificate principal balance of the Class A-S Certificates outstanding from time to time. The notional amount of the Class X-D Certificates will be equal to the certificate principal balance of the Class D Certificates outstanding from time to time. The notional amount of the Class X-E Certificates will be equal to the certificate principal balance of the Class E Certificates outstanding from time to time. The notional amount of the Class X-FG Certificates will be equal to the aggregate certificate principal balance of the Class F and Class G Certificates outstanding from time to time. The notional amount of the Class X-NR
   

 

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  Certificates will be equal to the certificate principal balance of the Class H Certificates outstanding from time to time.
   
 ·The pass-through rate on the Class X-A Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 weighted average of the pass-through rates of the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates as described in this free writing prospectus. The pass-through rate on the Class X-B Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 of the Class A-S Certificates as described in this free writing prospectus. The pass-through rate on the Class X-D Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 of the Class D Certificates as described in this free writing prospectus. The pass-through rate on the Class X-E Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 of the Class E Certificates as described in this free writing prospectus. The pass-through rate on the Class X-FG Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 weighted average of the pass-through rates of the Class F and Class G Certificates as described in this free writing prospectus. The pass-through rate on the Class X-NR Certificates will generally be equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans (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 of the Class H Certificates as described in this free writing prospectus.
   
 ·The Class V and Class R Certificates will not have certificate principal balances, notional amounts, pass-through rates, ratings or rated final distribution dates and will not be entitled to distributions of principal or interest (other than, with respect to the Class V Certificates, certain excess interest). The Class V Certificates represent a beneficial ownership interest held through the grantor trust in certain excess interest in respect of mortgage loans having anticipated repayment dates, if any. The Class R Certificates represent beneficial ownership of the residual interest in each of the real estate mortgage investment conduits, as further described in this free writing prospectus.
   

 

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Summary of Free Writing Prospectus
   
This summary highlights selected information from this free writing prospectus. It does not contain all of the information you need to consider in making your investment decision.To understand all of the terms of the certificates offered pursuant to this free writing prospectus, which we generally refer to as the “offered certificates,” you should read this entire free writing prospectus and the prospectus attached hereto as Exhibit A carefully.
   
What You Will Own
   
General Your certificates (together with the privately offered certificates) will represent beneficial interests in the issuing entity created by Banc of America Merrill Lynch Commercial Mortgage Inc. on the closing date pursuant to a pooling and servicing agreement dated as of September 1, 2015. All payments to you will come only from the amounts received in connection with the assets of the issuing entity. The issuing entity’s assets will primarily consist of forty-two (42) fixed rate mortgage loans secured by first liens on fifty-seven (57) multifamily, commercial and manufactured housing community properties.
   
  The transfers of the mortgage loans from the mortgage loan sellers to the depositor, and from the depositor to the issuing entity in exchange for the certificates are illustrated below:
   
  (flow chart) 
   
Title of Certificates Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7.
   
Mortgage Pool The mortgage pool consists offorty-two (42) mortgage loans with an aggregate principal balance as of September 1, 2015 of approximately $757,280,331 which may vary on the closing date by up to 5%. Each of the mortgage loans requires scheduled payments of principal and/or interest to be made monthly. For purposes of any mortgage loan that has a due date on a date other than the first of the month, we have assumed that amounts are due thereunder on the first of the month for purposes of determining its cut-off date and cut-off date balance.
   

 

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  The mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North secures a mortgage loan representing approximately 9.6% of the initial pool balance as well as two (2)pari passu non-serviced companion loans (evidenced by (3)pari passupromissory notes) and a separate subordinate note (the “Charles River Plaza North non-serviced B note” and a “B note”). Such mortgage loan is referred to herein as a “mortgage loan” and a “non-serviced mortgage loan” and, together with itspari passu non-serviced companion loans (and the related B note), as a “non-serviced loan combination.” Neither the relatedpari passu non-serviced companion loans nor the related B note will be a “mortgage loan” hereunder. The entire Charles River Plaza North non-serviced loan combination will be serviced under the CSAIL 2015-C3 pooling and servicing agreement.
   
  The mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue secures a mortgage loan, representing approximately 9.2% of the initial pool balance, which will be initially serviced under the pooling and servicing agreement for this securitization and, for so long as any such mortgage loan is so serviced, will be referred to herein (together with its relatedpari passu companion loan) as a “loan pair.” After the securitization of the relatedpari passu companion loan, such mortgage loan (together with the relatedpari passu companion loan) will be serviced under a pooling and servicing agreement entered into in connection with such securitization and, under such circumstances, such mortgage loan (together with the relatedpari passu companion loan) will be referred to herein as a “non-serviced loan combination.”
   
  The mortgaged property identified on APPENDIX I to this free writing prospectus as The Mall of New Hampshire secures a mortgage loan representing approximately 6.6% of the initial pool balance as well as apari passu non-serviced companion loan. Such mortgage loan is referred to herein as a “mortgage loan” and a “non-serviced mortgage loan” and, together with itspari passu non-serviced companion loan, as a “non-serviced loan combination.” The relatedpari passu non-serviced companion loan will not be a “mortgage loan” hereunder. The entire The Mall of New Hampshire non-serviced loan combination will be serviced under the CSAIL 2015-C3 pooling and servicing agreement.
   
  The mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street secures a mortgage loan representing approximately 5.5% of the initial pool balance as well as a subordinate note (the “200 Helen Street B note” and a “B note”), such mortgage loan and B note constitute the only A/B whole loan related to the issuing entity as of the closing date. The 200 Helen Street A/B whole loan will be serviced under the pooling and servicing agreement.
   
  The portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio secures a mortgage loan, representing approximately 2.7% of the initial pool balance, that will be serviced under the pooling and servicing agreement for this transaction. Such portfolio of mortgaged properties also secures twopari passu companion loans (each, a “servicedpari passu companion loan”). With respect to such portfolio of mortgaged
   

 

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  properties, the related mortgage loan is referred to herein (together with its related servicedpari passu companion loan) as a “loan pair.”
   
  The mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments secures a mortgage loan representing approximately 0.7% of the initial pool balance, as well as apari passu non-serviced companion loan. Such mortgage loan is referred to herein as a “mortgage loan” and a “non-serviced mortgage loan” and, together with itspari passu non-serviced companion loan, as a “non-serviced loan combination.” The relatedpari passu non-serviced companion loan will not be a “mortgage loan” hereunder. The entire Aviare Place Apartments non-serviced loan combination will be serviced under the MSBAM 2015-C23 pooling and servicing agreement.
   
  See “Information About the Mortgage Pool—Characteristics of the Mortgage Pool—The A/B Whole Loans, Loan Pairs and Non-Serviced Loan Combinations” below.
   
Relevant Parties, Dates and Periods
   
Issuing Entity Bank of America Merrill Lynch Commercial Mortgage Trust 2015-UBS7, a New York common law trust, will issue the certificates. The issuing entity will be formed pursuant to a pooling and servicing agreement to be dated as of September 1, 2015, between the depositor, the master servicer, the special servicer, the trustee, the certificate administrator, the custodian and the trust advisor, in each case identified below in this “—Relevant Parties, Dates and Periods” section. See “Transaction Parties—The Issuing Entity” in this free writing prospectus.
   
Depositor Banc of America Merrill Lynch Commercial Mortgage Inc. The Depositor was incorporated in the State of Delaware on December 13, 1995 under the name “NationsLink Funding Corporation” and filed Certificates of Amendment of Certificate of Incorporation changing its name to “Banc of America Commercial Mortgage Inc.” on August 24, 2000 and further changing its name to “Banc of America Merrill Lynch Commercial Mortgage Inc.” on July 1, 2010. The Depositor is a wholly owned subsidiary of Bank of America, National Association, one of the Sponsors. It is not expected that the Depositor will have any business operations other than offering mortgage pass-through certificates and related activities.
   
  The Depositor maintains its principal executive office at One Bryant Park, New York, New York 10036. Its telephone number is (980) 388-7451. See and “TRANSACTION PARTIES—The Depositor” in this free writing prospectus and “The Depositor” in the attached prospectus. Neither the Depositor nor any of its affiliates has insured or guaranteed the offered certificates.
   
Master Servicer Midland Loan Services, a Division of PNC Bank, National Association, a national banking association, will act as master servicer with respect to all of the mortgage loans in the issuing entity and will be primarily responsible for servicing and administering, directly or through sub-servicers (including any primary servicer), the mortgage loans (other than any non-serviced mortgage loans) and any related B note (other than the Charles River Plaza North non-serviced B note) or serviced
   

 

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  companion loan pursuant to the pooling and servicing agreement;provided, that certain major decisions and special servicer decisions will be processed by the special servicer. In addition, the master servicer will be the primary party responsible for making principal and interest advances and, other than with respect to any non-serviced mortgage loan, servicing advances under the pooling and servicing agreement. The principal servicing offices of Midland Loan Services, a Division of PNC Bank, National Association are located at 10851 Mastin Street, Building 82, Suite 300, Overland Park, Kansas 66210, and its telephone number is (913) 253-9000. See “Servicing of the Mortgage Loans—General,” “Transaction Parties—The Master Servicer” and “Servicing of the Mortgage Loans—The Master Servicer” in this free writing prospectus.
    
  The master servicer’s principal compensation for its servicing activities will be the master servicing fee. See “Offered Certificates—Distributions—Servicing and Administration Fees” below and “Servicing of the Mortgage Loans—General,” “Transaction Parties—The Master Servicer” and “Servicing of the Mortgage Loans—The Master Servicer” in this free writing prospectus. In addition, the master servicer will be entitled to retain certain borrower paid fees and certain income from investment of certain accounts maintained as part of the issuing entity, as additional servicing compensation.
    
  Except as provided below, each non-serviced mortgage loan (including the 261 Fifth Avenue mortgage loan prior to the securitization of the relatedpari passu companion loan) will be serviced by the master servicer under, and pursuant to the terms of, the pooling and servicing agreement governing the securitization of the related non-serviced companion loan (or applicable portion thereof) as follows:
    
  ·The Charles River Plaza North mortgage loan, representing approximately 9.6% of the initial pool balance, will be serviced by the master servicer under the pooling and servicing agreement for the CSAIL 2015-C3 securitization (currently Midland Loan Services, a Division of PNC Bank, National Association), which is similar to the pooling and servicing agreement for this securitization in respect of servicing.
    
  ·The 261 Fifth Avenue mortgage loan, representing approximately 9.2% of the initial pool balance, will initially be serviced (together with its relatedpari passu companion loan) by the master servicer under the pooling and servicing agreement for this securitization. After the securitization of the relatedpari passu companion loan, such mortgage loan will be a “non-serviced mortgage loan” and will be serviced (together with the relatedpari passu companion loan) under, and by the master servicer designated in, the pooling and servicing agreement entered into in connection with such securitization which is expected to be substantially similar to the pooling and servicing agreement for this securitization in respect of servicing. The master servicer under the pooling and servicing agreement for this securitization will be entitled to compensation for servicing such mortgage loan and the relatedpari passu companion loan for the period before the servicing transfer, and its right to indemnification and certain other rights in respect of its servicing activities will survive such transfer.
    

 

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  ·The Mall of New Hampshire mortgage loan, representing approximately 6.6% of the initial pool balance, will be serviced by the master servicer under the pooling and servicing agreement for the CSAIL 2015-C3 securitization (currently Midland Loan Services, a Division of PNC Bank, National Association), which is similar to the pooling and servicing agreement for this securitization in respect of servicing.
    
  ·The Aviare Place Apartments mortgage loan, representing approximately 0.7% of the initial pool balance, will be serviced by the master servicer under the pooling and servicing agreement for the MSBAM 2015-C23 securitization (currently Wells Fargo Bank, National Association), which is substantially similar to the pooling and servicing agreement for this securitization in respect of servicing.
    
  Each servicer of a non-serviced mortgage loan will be entitled to receive a primary servicing fee with respect to such non-serviced mortgage loan;however, the master servicer under the pooling and servicing agreement for this securitization will continue to be primarily responsible for making debt service advances with respect to such non-serviced mortgage loan (and will not be responsible for making debt service advances with respect to the related non-serviced companion loan). See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations” and “Servicing of the Mortgage Loans—Additional Matters Relating to the Servicing of the Non-Serviced Mortgage Loans” in this free writing prospectus.
    
Special Servicer LNR Partners, LLC, a Florida limited liability company, will act as special servicer with respect to all of the mortgage loans in the issuing entity (other than any non-serviced mortgage loans and excluded special servicer mortgage loans) pursuant to the pooling and servicing agreement. The special servicer will be primarily responsible for making decisions and performing certain servicing functions with respect to such mortgage loans (and any related serviced companion loan or serviced B note) and any REO loans in respect of the foregoing, in each case that, in general, are in default or as to which default is imminent, as well as processing certain major decisions and special servicer decisions for all such mortgage loans regardless of whether they are, or will be, in default. It is anticipated that LNR Partners, LLC will be appointed to be the special servicer for this transaction at the request of the initial controlling class representative, which is expected to be Ellington Management Group, LLC or an affiliate thereof. See “—Controlling Class Representative” below. The principal servicing office of LNR Partners, LLC is located at 1601 Washington Avenue, Suite 700, Miami Beach, Florida 33139 and its telephone number is (305) 695-5600. See “Servicing of the Mortgage Loans—General,” “Transaction Parties—The Special Servicer” and “Servicing of the Mortgage Loans—The Special Servicer” in this free writing prospectus.
    
  If the special servicer becomes a “borrower party” (as defined under “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer and Appointment of an Excluded Special Servicer” in this free writing prospectus) with respect to any mortgage loan (referred to as an “excluded special servicer mortgage loan”), then the special servicer will be required to resign with respect
   

 

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  to such mortgage loan. The controlling class representative (during any Subordinate Control Period) will be entitled to appoint a separate special servicer that is not a borrower party (referred to as an “excluded special servicer”) with respect to such excluded special servicer mortgage loan unless such excluded special servicer mortgage loan is also an excluded mortgage loan, in which case the largest controlling class certificateholder (by certificate principal balance) that is not an excluded controlling class holder will be entitled to appoint the excluded special servicer. During any Collective Consultation Period the largest controlling class certificateholder (by certificate principal balance) that is not an excluded controlling class holder will be entitled to appoint the excluded special servicer. During any Senior Consultation Period, certificateholders holding 50% or more of the voting rights (provided 20% or more exercise their right to vote) will be entitled to appoint the excluded special servicer. See “—Controlling Class Representative” below. Any excluded special servicer will be required to perform all of the obligations of the special servicer and will be entitled to all special servicing compensation with respect to such excluded special servicer mortgage loan earned during such time as the related mortgage loan is an excluded special servicer mortgage loan.
   
  As used herein, “Affiliate” means, with respect to any specified person, any other person controlling or controlled by or under common control with such specified person;provided, that “control” when used with respect to any specified person means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.
   
  References herein to the “special servicer” mean individually or collectively, as the context may require, LNR Partners, LLC as special servicer with respect to all mortgage loans other than any excluded special servicer mortgage loans and any non-serviced mortgage loans, and the excluded special servicer, as special servicer with respect to any excluded special servicer mortgage loans. Unless specifically stated otherwise, any rights, conditions or obligations of or applicable to the “special servicer” described herein (including with respect to qualification under the pooling and servicing agreement, compensation and resignation) apply equally to both LNR Partners, LLC and any excluded special servicer.
   
  The special servicer’s principal compensation for its special servicing activities will be the special servicing fee, the workout fee and the liquidation fee. See “Offered Certificates—Distributions—Servicing and Administration Fees” below and “Servicing of the Mortgage Loans—General,” “Transaction Parties—The Special Servicer” and “Servicing of the Mortgage Loans—The Special Servicer” in this free writing prospectus. In addition, the special servicer will be entitled to retain certain borrower paid fees and certain income from investment of certain accounts maintained as part of the issuing entity, as additional servicing compensation.
   
  Except as provided below, each non-serviced mortgage loan (including the 261 Fifth Avenue mortgage loan prior to the securitization of the
   

 

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  relatedpari passu companion loan) if circumstances require will be specially serviced, if necessary, by the special servicer under, and pursuant to the terms of, the pooling and servicing agreement governing the securitization of the related non-serviced companion loan (or applicable portion thereof) as follows:
    
  ·If necessary, the Charles River Plaza North mortgage loan, representing approximately 9.6% of the initial pool balance, if circumstances require will be specially serviced by the special servicer under the pooling and servicing agreement for the CSAIL 2015-C3 securitization (currently Rialto Capital Advisors, LLC), which is similar to the pooling and servicing agreement for this securitization in respect of servicing.
    
  ·If necessary, the 261 Fifth Avenue mortgage loan, representing approximately 9.2% of the initial pool balance, will initially be specially serviced by the special servicer under the pooling and servicing agreement for this securitization. After the securitization of the relatedpari passu companion loan, such mortgage loan (together with the relatedpari passu companion loan) will be (if the circumstances require) specially serviced by the special servicer designated in the pooling and servicing agreement entered into in connection with such securitization. If such mortgage loan becomes specially serviced prior to the securitization of the relatedpari passu companion loan, the special servicer will be responsible for the servicing and administration of such mortgage loan (and the relatedpari passu companion loan) and will be entitled to compensation as described under the pooling and servicing agreement and the related intercreditor agreement. If such mortgage loan is being specially serviced when the relatedpari passu companion loan is securitized, the special servicer will be entitled to compensation for the period during which it acted as special servicer with respect to such mortgage loan, as well as all surviving indemnity and other rights in respect of such special servicing role. See “Risk Factors—Risks Related to the Offered Certificates—The Servicing of the 261 Fifth Avenue Loan Pair Is Expected to Shift to Others” in this free writing prospectus.
    
  ·If necessary, The Mall of New Hampshire mortgage loan, representing approximately 6.6% of the initial pool balance, if circumstances require will be specially serviced by the special servicer under the pooling and servicing agreement for the CSAIL 2015-C3 securitization (currently Rialto Capital Advisors, LLC), which is similar to the pooling and servicing agreement for this securitization in respect of servicing.
    
  ·If necessary, the Aviare Place Apartments mortgage loan, representing approximately 0.7% of the initial pool balance, if circumstances require will be specially serviced by the excluded mortgage loan special servicer under the pooling and servicing agreement for the MSBAM 2015-C23 securitization (currently Wells Fargo Bank, National Association), which is substantially similar to the pooling and servicing agreement for this securitization in respect of servicing.
    

 

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  See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations” and “Servicing of the Mortgage Loans—Additional Matters Relating to the Servicing of the Non-Serviced Mortgage Loans” in this free writing prospectus.
    
  With respect to each non-serviced mortgage loan and the 261 Fifth Avenue mortgage loan (after the securitization of the relatedpari passu companion loan), the holder of the related controlling note (or a representative thereof) will be entitled to direct the servicing of the related non-serviced loan combination or loan pair, as applicable;however, the controlling class representative (during any Subordinate Control Period and Collective Consultation Period) will have certain consultation rights with respect to such servicing and the right to require the replacement of the special servicer for the non-serviced loan combination or loan pair, as applicable, in certain circumstances after a servicer termination event with respect to such special servicer. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations” and “—The A/B Whole Loans and the Loan Pairs—The 261 Fifth Avenue Loan Pair” in this free writing prospectus.
    
  With respect to any A/B whole loan, the holder of the related B note will be entitled to direct the special servicing of the related A/B whole loan prior to a 200 Helen Street AB Control Appraisal Event (as described below in “Description of the Mortgage Pool—The Non-Serviced Loan The A/B Whole Loans and the Loan Pairs—The 200 Helen Street A/B Whole Loan” in this free writing prospectus).
    
  The special servicer under the pooling and servicing agreement for this securitization or, in the case of any non-serviced loan combination, the applicable special servicer under the related other pooling and servicing agreement may be removed and a successor special servicer appointed, at any time, as follows:
    
  ·with respect to the pool of mortgage loans other than any non-serviced mortgage loans (and in the case of a mortgage loan that is part of an A/B whole loan or loan pair, subject to the third bullet of this paragraph), during any Subordinate Control Period (as defined below), at the direction of the controlling class representative, if any, (a) for cause at any time and (b) without cause if (i) LNR Partners, LLC or its affiliate is no longer the special servicer or (ii) LNR Securities Holdings, LLC or its affiliate owns less than 15% of the then controlling class of certificates;
    
  ·with respect to the pool of mortgage loans other than any non-serviced mortgage loans (and in the case of a mortgage loan that is part of an A/B whole loan or loan pair, subject to the third bullet of this paragraph), during any Collective Consultation Period and any Senior Consultation Period (each such term, as defined below), if the holders of at least 25% of the voting rights of the certificates request a vote to replace the special servicer, by the holders of certificates evidencing at least 75% of the voting rights of the certificates; and
    
  ·in the case of a mortgage loan that is part of an A/B whole loan, loan pair or non-serviced loan combination where, to the extent provided for in the related intercreditor agreement, the holder of a
    

 

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   related B note or serviced companion loan, as applicable (for so long as such holder is the directing holder in respect of such A/B whole loan, loan pair or non-serviced loan combination, as applicable), may, without cause, replace the special servicer for the related A/B whole loan, loan pair or non-serviced loan combination. In particular,
     
   oWith respect to the Charles River Plaza North non-serviced loan combination, the related special servicer under the CSAIL 2015-C3 pooling and servicing agreement may be removed, with or without cause, and a successor special servicer appointed, at any time, by the holder of the related B note if the principal balance of such B note (as reduced or notionally reduced, as applicable, by the application of payments, losses and appraisal reductions) has not been reduced below 25% of its original principal balance (as reduced by principal payments), and (if such B note does not satisfy such criteria) by the CSAIL 2015-C3 controlling class representative or certificateholders with the requisite CSAIL 2015-C3 voting rights, as applicable, all pursuant to the terms of the related intercreditor agreement and the CSAIL 2015-C3 pooling and servicing agreement, the terms of which pooling and servicing agreement are similar to those contained in the pooling and servicing agreement for this transaction;provided, that the CSAIL 2015-C3 pooling and servicing agreement imposes different limitations on the ability of the applicable controlling class representative to remove the special servicer without cause.
     
   oWith respect to the 261 Fifth Avenue loan pair, the related special servicer is subject to removal by the relatedpari passu companion loan holder and (following a securitization of the relatedpari passu companion loan) the related special servicer is expected to be subject to removal (and replacement by a successor special servicer) pursuant to similar terms contained in the pooling and servicing agreement related to the securitization of the relatedpari passu companion loan;provided, that such pooling and servicing agreement (i) may provide for certain variations in the percentage of certificateholders required to consent to a removal of the special servicer and (ii) different (or no) limitations on the ability of the applicable controlling class representative to remove the special servicer without cause.
     
   oWith respect to any non-serviced loan combinations (other than 261 Fifth Avenue and Charles River Plaza North), the related special servicer under the pooling and servicing agreement pursuant to which such non-serviced loan combination is being serviced may generally be replaced on terms that are similar to those for the replacement of the special servicer under the pooling and servicing agreement for this transaction.
     
  See “—Directing Holders” below and “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer Without Cause,” “Description of the Mortgage Pool—The A/B Whole
   

 

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  Loans and the Loan Pairs” and “—The Non-Serviced Loan Combinations” in this free writing prospectus.
    
  In addition, the special servicer may be removed as special servicer with respect to a mortgage loan or Loan Pair if the special servicer becomes a “borrower party” with respect to an “excluded special servicer mortgage loan” under the circumstances described in “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer and Appointment of an Excluded Special Servicer” in this free writing prospectus.
    
  Finally, in the case of any non-serviced loan combination (including the 261 Fifth Avenue mortgage loan (after the securitization of the related pari passu companion loan)), the applicable special servicer under the related other pooling and servicing agreement may contain provisions providing for the special servicer to be removed for conflicts similar to those described in “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer and Appointment of an Excluded Special Servicer” in this free writing prospectus pursuant to the terms of the related other pooling and servicing agreement.
    
Other Servicers Rialto Capital Advisors, LLC is the special servicer with respect to the CSAIL 2015-C3 securitization and, accordingly, is responsible for servicing of the Charles River Plaza North Non-Serviced Loan Combination and The Mall of New Hampshire Non-Serviced Loan Combination.
    
Trustee, Certificate Administrator   
and Custodian U.S. Bank National Association, a national banking association, will act as trustee of the issuing entity on behalf of the certificateholders, as certificate administrator, certificate registrar and authenticating agent for the certificates and as custodian of the mortgage loan files (or, in the case of any non-serviced mortgage loan, of only the related mortgage note). The corporate trust offices of U.S. Bank National Association are located at 190 S. LaSalle Street, 7th Floor, Mail Code: MK-IL-SL7C, Chicago, Illinois 60603, Attention: BACM 2015-UBS7, the office designated for purposes of certificate transfers and exchanges is located at 111 Fillmore Avenue, St. Paul, Minnesota 55107, Attention: Bondholder Services – BACM 2015-UBS7, and the document custody office is located at 1133 Rankin Street, Suite 100, St. Paul, Minnesota 55116, Attention: BACM 2015-UBS7.
    
  Following the transfer of the mortgage loans into the issuing entity, the trustee, on behalf of the issuing entity, will become the mortgagee of record of each mortgage loan transferred to the issuing entity (other than any non-serviced mortgage loan (including the 261 Fifth Avenue mortgage loan following the securitization of the relatedpari passu companion loan), with respect to which the mortgagee of record will be the holder of the related non-serviced companion loan or applicable portion thereof (or the trustee in respect of the securitization thereof)). In addition, the trustee will be primarily responsible for back-up advancing if the master servicer fails to perform its advancing obligations.
   

 

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  The certificate administrator will be primarily responsible for making allocations and distributions to the holders of the certificates. The certificate administrator will have, or will be responsible for appointing an agent to perform, additional duties with respect to tax administration of the issuing entity. See “Transaction Parties—The Trustee, Certificate Administrator and Custodian” in this free writing prospectus.
    
  With respect to the 261 Fifth Avenue mortgage loan, the mortgage loan seller initially will be required to deliver the related mortgage loan documents (other than any promissory note evidencing the relatedpari passu companion loan) to the trustee or the custodian on its behalf. Following a securitization of the relatedpari passu companion loan, the person contributing such portion of the companion loan to the related securitization will be entitled to (a) direct the trustee or custodian to deliver (and to retain photocopies in connection therewith of) all such mortgage loan documents (other than any promissory note evidencing such mortgage loan) to the other trustee or custodian and (b) cause the completion and recordation of instruments of assignment in the name of such other trustee or custodian.
    
Controlling Class Representative The controlling class representative will be the representative appointed by more than 50% of the controlling class certificateholders (by certificate principal balance), as determined by the certificate registrar from time to time as provided in the pooling and servicing agreement. A summary of the consent and consultation rights of the controlling class representative, and the limitations thereon, is set forth below. It is anticipated that Ellington Management Group, LLC or an affiliate thereof will be the initial controlling class representative. There will be no controlling class representative for an excluded mortgage loan.
    
  An “excluded mortgage loan” is a mortgage loan or loan pair with respect to which the controlling class representative, or any holder of more than 50% of the controlling class, is a borrower party.
    
  The controlling class means, as of any time of determination, the most subordinate class of Control Eligible Certificates then outstanding that has an aggregate certificate principal balance (taking into account the application of any appraisal reductions to notionally reduce the aggregate certificate principal balance of such class) at least equal to 25% of the initial certificate principal balance of such class;provided that if no class of Control Eligible Certificates has an aggregate certificate principal balance (taking into account the application of any appraisal reductions to notionally reduce the aggregate certificate principal balance of such class) at least equal to 25% of the initial aggregate certificate principal balance of such class, then the controlling class will be the most senior class of Control Eligible Certificates. The controlling class on the closing date will be the Class H Certificates.
    
  The Control Eligible Certificates will be the Class E, Class F, Class G and Class H Certificates. No other class of certificates will be eligible to act as the controlling class or appoint the controlling class representative.
    
  A Subordinate Control Period means any period when the aggregate certificate principal balance of the Class E Certificates (taking into
   

 

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  account the application of appraisal reductions to notionally reduce the aggregate certificate principal balance of such class) is at least 25% of the initial aggregate certificate principal balance of the Class E Certificates.
    
  A Collective Consultation Period means any period when both (i) the aggregate certificate principal balance of the Class E Certificates (taking into account the application of appraisal reductions to notionally reduce the aggregate certificate principal balance of such class) is less than 25% of the initial aggregate certificate principal balance of the Class E Certificates and (ii) the aggregate certificate principal balance of the Class E Certificates (without regard to any appraisal reductions allocable to such class) is at least 25% of the initial aggregate certificate principal balance of the Class E Certificates.
    
  A Senior Consultation Period means any period when the aggregate certificate principal balance of the Class E Certificates (without regard to any appraisal reductions allocable to such class) is less than 25% of the initial aggregate certificate principal balance of the Class E Certificates.
    
  During any Subordinate Control Period, the controlling class representative will have certain consent and consultation rights under the pooling and servicing agreement with respect to certain major decisions and other matters.
    
  During any Collective Consultation Period and any Senior Consultation Period, the controlling class representative will not have any consent rights. However, during any Collective Consultation Period, the controlling class representative will have non-binding consultation rights with respect to certain major decisions and other matters in accordance with the pooling and servicing agreement.
    
  During any Senior Consultation Period, the controlling class representative will not have any consent or consultation rights, except with respect to any such rights that are expressly operative during such period pursuant to the pooling and servicing agreement. See “Servicing of the Mortgage Loans—The Controlling Class Representative” in this free writing prospectus.
    
  If any mortgage loan is part of an A/B whole loan, loan pair or non-serviced loan combination, the controlling class representative’s consent and/or consultation rights with respect thereto may be limited as further described in this free writing prospectus. The existence of a Subordinate Control Period, Collective Consultation Period or Senior Consultation Period will not limit any control and/or consultation rights of the holder of any related B note or companion loan. See “—Directing Holders” below, and “Risk Factors—Risks Related to the Offered Certificates—Realization on a Mortgage Loan That Is Part of an A/B Whole Loan or Loan Pair May Be Adversely Affected by the Rights of the Related Directing Holder,” “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” and “—The Non-Serviced Loan Combinations” in this free writing prospectus.
    
  The controlling class representative will have certain approval rights and rights to direct and consult with the special servicer as described under “Servicing of the Mortgage Loans—The Controlling Class
   

 

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  Representative” in this free writing prospectus. For instance, during a Subordinate Control Period, the controlling class representative may direct the special servicer to take actions that conflict with and adversely affect the interests of holders of certain classes of certificates.
   
  In connection with the servicing of the mortgage loans, the special servicer may, at the direction of the controlling class representative or a directing holder, as applicable, take actions with respect to the mortgage loans (other than any non-serviced mortgage loan) that could adversely affect the holders of some of the classes of certificates. Additionally, the special servicer may be removed without cause by the controlling class representative, if any (during a Subordinate Control Period and only if (i) LNR Partners, LLC or its affiliate is no longer the special servicer or (ii) LNR Securities Holdings, LLC or its affiliate owns less than 15% of the then controlling class of certificates), or with respect to a mortgage loan that is part of an A/B whole loan or loan pair, by the related directing holder. As a result of these rights, the controlling class representative and any directing holder may have interests in conflict with those of the other certificateholders. See “Risk Factors—Risks Related to Conflicts of Interest—Conflicts of Interest of the Controlling Class Representative; Rights of the Controlling Class Representative Could Adversely Affect Your Investment” and “—Conflicts of Interest of the Directing Holders; Rights of the Directing Holders Could Adversely Affect Your Investment” in this free writing prospectus.
   
  The controlling class representative may have interests that differ from or are in conflict with those of other certificateholders and its decisions may not be in the best interest of or may be adverse to other certificateholders.
   
  The anticipated initial investors in the Control Eligible Certificates (referred to herein as the B-piece buyers) may act as, or appoint, the controlling class representative. The B-piece buyers were 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 may have been given the opportunity to request the removal or re-sizing of, or the modification of certain features of, some or all of the mortgage loans. We cannot assure you that you or another investor would make the same requests to modify the original pool as the B-piece buyers, or that the final mortgage pool, to the extent influenced by the B-piece buyers’ feedback, will not adversely affect the performance of your certificates and benefit the performance of the B-piece buyers’ certificates. Because of the differing subordination levels, the B-piece buyers have 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 buyers but that does not benefit other investors. The B-piece buyers performed any such due diligence for their own benefit and have no obligation or duty to anyone else. You should not take the B-piece buyers’ acceptance of any mortgage loan as an endorsement of that mortgage loan or its quality. See “Risk Factors—Risks Related to Conflicts of Interest—Conflicts in the Selection of the Underlying Mortgage Loans” in this free writing prospectus.
   

 

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  With respect to any excluded special servicer mortgage loan (that is also not an excluded mortgage loan), if any, the controlling class certificateholder (during any Subordinate Control Period) will be entitled to appoint an excluded special servicer with respect to such mortgage loan. If a Subordinate Control Period is not in effect, the controlling class certificateholder will not have the right to replace such excluded special servicer and such excluded special servicer will be appointed as described in “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer and Appointment of an Excluded Special Servicer” in this free writing prospectus.
   
  For additional information regarding the controlling class representative, see “Servicing of the Mortgage Loans—The Controlling Class Representative” in this free writing prospectus.
   
Trust Advisor Pentalpha Surveillance LLC, a Delaware limited liability company, will act as the trust advisor with respect to all of the mortgage loans except any non-serviced mortgage loan and the 261 Fifth Avenue mortgage loan. The trust advisor will be required to promptly review all information available to certain privileged persons on the certificate administrator’s website related to any specially serviced mortgage loan or REO property and each asset status report with respect to specially serviced mortgage loans (provided, that during any Subordinate Control Period, the trust advisor may only review final asset status reports).
   
  During any Collective Consultation Period and any Senior Consultation Period, within sixty (60) days after the end of each calendar year during which any mortgage loan was a specially serviced mortgage loan or any mortgaged property was an REO property, the trust advisor will be required to meet with representatives of the special servicer (if it was acting as special servicer as of December 31st in the prior calendar year and had continued in such capacity through the date of such meeting) to review certain operational practices of the special servicer related to specially serviced mortgage loans and REO properties.
   
  In addition, during any Collective Consultation Period and any Senior Consultation Period, based on (i) the trust advisor’s annual meeting with the special servicer and (ii) the trust advisor’s review of any asset status reports and other information delivered to the trust advisor by the special servicer and any other information available to certain privileged persons on the certificate administrator’s website, the trust advisor will be required to prepare an annual report to beprovided to the certificate administrator (and to be 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 during the prior calendar year on a platform-level basis with respect to the resolution or liquidation of specially serviced mortgage loans and REO properties. If the special servicer is replaced, the trust advisor’s annual report will only relate to the entity that was acting as special servicer as of December 31st in the prior calendar year and is continuing in such capacity through the date of such annual report. No such annual report will be required to be prepared or delivered with respect to any calendar year as to which no annual meeting is required to be held or with respect to any calendar year
   

 

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  during which no asset status reports have been prepared in connection with a specially serviced mortgage loan or REO property.
   
  Furthermore, during any Collective Consultation Period, any Senior Consultation Period or, with respect to any excluded loan, any Subordinate Control Period, the special servicer will be required to consult (on a non-binding basis) with the trust advisor in connection with certain major decisions involving any mortgage loan, A/B whole loan, loan pair or any related REO property to the extent described in this free writing prospectus and as set forth in the pooling and servicing agreement;provided, that with respect to matters relating to any A/B whole loan or loan pair, the special servicer will only be required to consult with the trust advisor with regard to such matters if the holder of the related serviced B note or serviced companion loan, as applicable, is not (or is no longer) the directing holder with respect to such A/B whole loan or loan pair pursuant to the terms of the applicable intercreditor agreement, and prior to such time, the trust advisor will have no obligations under the pooling and servicing agreement with respect to such A/B whole loan or loan pair.
   
  During any Subordinate Control Period, (A) there will be no annual meeting between the trust advisor and special servicer or any annual report prepared by the trust advisor and (B) the trust advisor will not distribute any report based on any review of the special servicer’s actions. In addition, the trust advisor will not have the right or obligation during any Subordinate Control Period to consult with regard to any particular servicing actions, or otherwise opine on the actions of the special servicer with respect to any mortgage loan. In no event will the trust advisor have any consent right with respect to any particular servicing actions.
   
  Notwithstanding the foregoing, the trust advisor will have no role or obligation with respect to any non-serviced mortgage loan, the 261 Fifth Avenue mortgage loan or any related REO property.
   
  The trust advisor will be subject to confidentiality and other limitations described in this free writing prospectus and set forth in the pooling and servicing agreement.
   
  If the holders of at least 25% of the voting rights of the certificates request a vote to terminate and/or replace the trust advisor, then the holders of at least 75% of the voting rights of the certificates may vote to either (i) terminate all rights and obligations of the trust advisor with respect to the mortgage loans under the pooling and servicing agreement and replace the trust advisor, or (ii) terminate all rights and obligations of the trust advisor in respect of the mortgage loans under the pooling and servicing agreement and not appoint a replacement trust advisor, in which case all references to the trust advisor in the pooling and servicing agreement will be of no force and effect;provided, that if holders of at least 25% of the voting rights of the certificates subsequently request a vote to reinstate the role of trust advisor and appoint a new trust advisor under the pooling and servicing agreement, and the holders of at least 75% of the voting rights of the certificates vote in favor of such appointment, then a new trust advisor will be appointed in respect of such mortgage loans and references to such trust advisor in the pooling and servicing agreement will again be applicable. During any Subordinate Control Period and any Collective
   

  

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  Consultation Period, the controlling class representative will have the right to consent, such consent not to be unreasonably withheld, to any such replacement trust advisor;provided, that such consent will be deemed granted if no objection is made within ten (10) business days following the controlling class representative’s receipt of the request for consent. Any such consent will be required to be solicited from the controlling class representative before any related vote. See “Servicing of the Mortgage Loans—The Trust Advisor—Termination of the Trust Advisor Without Cause” in this free writing prospectus.
   
  In addition, during any Senior Consultation Period, if the trust advisor determines that the special servicer is not performing its duties in accordance with the servicing standard, the trust advisor may recommend the replacement of the special servicer to the trustee. The trust advisor’s recommendation to replace the special servicer must be confirmed by an affirmative vote of holders of a majority of the voting rights of the principal balance certificates. See “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer Without Cause” in this free writing prospectus.
   
  The trust advisor may have interests that are in conflict with those of certificateholders and its advice and consultations may not be in the best interest of certificateholders. See “Risk Factors—Risks Related to Conflicts of Interest—Conflicts of Interest of the Trust Advisor” in this free writing prospectus.
   
  For additional information regarding the responsibilities of the trust advisor and regarding the trust advisor itself, see “Servicing of the Mortgage Loans—The Trust Advisor” and “Transaction Parties—The Trust Advisor” in this free writing prospectus.
   
Directing Holders If a mortgage loan is part of an A/B whole loan or loan pair, then as of the closing date the holder of a related B note or serviced companion loan will be the directing holder if and to the extent described under “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs.” If and for so long as the holder of a B note or serviced companion loan is the related directing holder pursuant to the terms of the related intercreditor agreement, such holder will have broad consent and/or consultation rights with respect to the related A/B whole loan or loan pair and may have the right to replace the special servicer with respect to the related mortgage loan.
   
  No directing holder will be a party to the pooling and servicing agreement, but its rights may affect the servicing of the related mortgage loan. Further, a directing holder may have interests that are in conflict with those of certificateholders and its decisions may not be in the best interest of certificateholders. See “Servicing of the Mortgage Loans” and “Risk Factors—Risks Related to Conflicts of Interest—Conflicts of Interest of the Directing Holders; Rights of the Directing Holders Could Adversely Affect Your Investment” in this free writing prospectus.
   
  The rights of a directing holder will be unaffected by the existence of any Subordinate Control Period, Collective Consultation Period or Senior Consultation Period.
   

  

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  Loan Pairs
   
  With respect to the 261 Fifth Avenue loan pair (or, following the securitization of the relatedpari passu companion loan, the related non-serviced loan combination), the holder of the related controlling note, or a representative of such holder, will at all times act as the controlling note holder thereto;however, the controlling class representative (during any Subordinate Control Period and Collective Consultation Period) will have certain consultation rights with respect to the servicing of the 261 Fifth Avenue loan pair and the right to require the replacement of the special servicer with respect thereto in certain circumstances after a servicer termination event with respect to such special servicer. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The 261 Fifth Avenue Loan Pair—The 261 Fifth Avenue Intercreditor Agreement—Consultation and Control” and “—Appointment of Special Servicer” in this free writing prospectus.
   
  With respect to the WPC Department Store Portfolio loan pair, the holders of the related serviced companion loans will only have certain consultation rights with respect to such loan pair and the right to require the replacement of the special servicer with respect thereto in certain circumstances after a servicer termination event with respect to such special servicer. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The WPC Department Store Portfolio Loan Pair” herein.
   
  Non-Serviced Loan Combinations
   
  With respect to the Charles River Plaza North non-serviced loan combination, the holder of the related B note, so long as the principal balance of such B note (as reduced or notionally reduced, as applicable, by the application of payments, losses and appraisal reductions) has not been reduced below 25% of its original principal balance (as reduced by principal payments), or (if the B note does not satisfy such criteria) the CSAIL 2015-C3 controlling class representative (unless a CSAIL 2015-C3 control termination event exists), will be the directing holder under the related intercreditor agreement pursuant to the terms thereof and the CSAIL 2015-C3 pooling and servicing agreement. See “—Special Servicer” above and “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—The Charles River Plaza North Non-Serviced Loan Combination” herein.
   
  With respect to The Mall of New Hampshire non-serviced loan combination, the holder of the related non-serviced companion loan will at all times act as directing holder with respect The Mall of New Hampshire mortgage loan. However, the holder of The Mall of New Hampshire mortgage loan has certain consultation rights with respect to the servicing of such mortgage loan and the right to require the replacement of the special servicer (or excluded mortgage loan special servicer, as applicable) for related non-serviced loan combination after a servicer termination event with respect to the special servicer for such loan. See “—Special Servicer” above and “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—The Mall of New Hampshire Non-Serviced Loan Combination” herein.
   

 

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  With respect to the Aviare Place Apartments non-serviced loan combination, the holder of the related non-serviced companion loan will at all times act as directing holder with respect to the Aviare Place Apartments mortgage loan. However, the holder of the Aviare Place Apartments mortgage loan has certain consultation rights with respect to the servicing of such mortgage loan and the right to require the replacement of the special servicer (or excluded mortgage loan special servicer, as applicable) for related non-serviced loan combination after a servicer termination event with respect to the special servicer for such loan. See “—Special Servicer” above and “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—TheAviare Place Apartments Non-Serviced Loan Combination” herein.
   
  See “Risk Factors—Risks Related to the Offered Certificates—Realization on a Mortgage Loan That Is Part of an A/B Whole Loan or Loan Pair May Be Adversely Affected by the Rights of the Related Directing Holder” and “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus.
   
Sponsors UBS Real Estate Securities Inc., a Delaware Corporation, and Bank of America, National Association, a national banking association, are the sponsors of this transaction. As sponsors, such entities organized and initiated the issuance of the certificates and will sell mortgage loans to the depositor. The depositor will transfer the mortgage loans to the issuing entity, and the issuing entity will then issue the certificates. See “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators” in this free writing prospectus and “Bank of America, National Association, as Sponsor” and “Other Originators” in the attached prospectus.
   
Mortgage Loan Sellers Each mortgage loan seller listed below will sell us mortgage loans as follows:
         
  Mortgage Loan Seller Percentage of
Initial Pool
Balance
 Number of
Mortgage
 Loans
  UBS Real Estate Securities Inc. 83.7%  33 
  Bank of America, National Association 16.3%  9 
   
  See “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators” in this free writing prospectus.
   
Originators Each mortgage loan seller or its affiliate originated the mortgage loans as to which it is acting as mortgage loan seller (except that the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as Fountains at Andover, representing approximately 2.9% of the initial pool balance, was originated by UBS Real Estate Securities Inc. in conjunction with a third party, Greystone Servicing Corporation, Inc.). See “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators” in this free writing prospectus.
   
Conflicts of Interest The relationships between the parties to this transaction and the activities of those parties or their affiliates and the relationships between certain other parties may give rise to certain conflicts of interest. These conflicts of interests may arise from, among other things, the following relationships and activities:
   

 

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  ·the relationships, including financial dealings, of the sponsors, the underwriters, the master servicer, a sub-servicer, the special servicer, the trust advisor or any of their respective affiliates, especially if the master servicer, a sub-servicer, the special servicer, the trust advisor or any of their respective affiliates holds certificates or interests in, or securities backed by, B notes, serviced companion loans or non-serviced companion loans, or has financial interests in or other financial dealings with a borrower or a property sponsor;
    
  ·the broker-dealer activities of the underwriters and their respective affiliates, including investing or taking long or short positions in the offered certificates and rendering services to, and engaging in transactions with, the borrowers, the property sponsors and their respective affiliates;
    
  ·the obligation of the special servicer to take actions at the direction of the controlling class representative and any directing holder;
    
  ·the ownership of any certificates or interests in, or securities backed by, B notes, mezzanine debt, serviced companion loans or non-serviced companion loans by the depositor, mortgage loan sellers, underwriters, master servicer, special servicer, trust advisor or any of their affiliates;
    
  ·the relationships between the managers of the mortgaged properties and the borrowers, particularly because a substantial number of mortgaged properties are managed by property managers affiliated with the respective borrowers;
    
  ·the consent and/or consultation rights of the controlling class representative, the trust advisor and any directing holder to certain actions taken by the special servicer;
    
  ·any opportunity of the B-piece buyers to request the removal, re-sizing or modification of or other changes to the features of some or all of the mortgage loans; and
    
  ·the activities of the master servicer, a sub-servicer, the special servicer, the trust advisor, the mortgage loan sellers or any of their affiliates in connection with any other transaction.
    
  With respect to any non-serviced mortgage loan, the related master servicer, special servicer and any other entity party to any securitization of the related non-serviced companion loan (or applicable portion thereof) will have similar conflicts of interest, particularly if such entity owns certificates issued pursuant to such securitization.
    
  See “Risk Factors—Risks Related to Conflicts of Interest” in this free writing prospectus.
    
Significant Obligors There are no significant obligors related to the issuing entity.
    
Underwriters Merrill Lynch, Pierce, Fenner & Smith Incorporated, UBS Securities LLC and Drexel Hamilton, LLC will act as underwriters with respect to the offered certificates.
   

 

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Certain Affiliations Bank of America, National Association and its affiliates have several roles in this transaction. Bank of America, National Association is a Sponsor and the parent of the Depositor. Bank of America, National Association originated or acquired certain of the mortgage loans and will be selling them to the Depositor. Bank of America, National Association is also an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, an underwriter for the offering of the certificates. Bank of America, National Association or its affiliates may also provide financing to the originator of the mortgage loans. Bank of America, National Association, the Depositor and their affiliates may also have other investment banking or commercial banking relationships with borrowers, originators, servicers, trustees, certificate administrators, REMIC administrators and other transaction parties.
   
  In addition, Bank of America, National Association, is the initial holder of the 261 Fifth Avenuepari passu companion loan.
   
  UBS Real Estate Securities Inc., a mortgage loan seller, an originator and a sponsor, is an affiliate of UBS Securities LLC, one of the underwriters.
   
  In addition, UBS Real Estate Securities Inc. is the initial holder of the Charles River Plaza Northpari passu companion loan designated Note A-3-2 and the WPC Department Store Portfoliopari passu companion loan designated Note A-1.
   
  Midland Loan Services, a Division of PNC Bank, National Association will acquire the right to act as master servicer and/or primary servicer (and the related right to receive and retain the excess servicing strip) with respect to the mortgage loans sold to the issuing entity by the sponsors pursuant to one or more servicing rights appointment agreements entered into on the closing date. The “excess servicing strip” means a portion of the master servicing fee payable to Midland Loan Services, a Division of PNC Bank, National Association that accrues at aper annum rate initially equal to the master servicing fee rate minus 0.0025%, but which may be reduced under certain circumstances as provided in the pooling and servicing agreement.
   
  Under the CSAIL 2015-C3 pooling and servicing agreement, Midland Loan Services, a Division of PNC Bank, National Association is also the CSAIL 2015-C3 master servicer and, accordingly, is responsible for servicing of the Charles River Plaza North non-serviced loan combination, The Mall of New Hampshire non-serviced loan combination and, until the closing date of this securitization, the WPC Department Store Portfolio loan pair.
   
  Pursuant to a certain interim servicing agreement between UBS Real Estate Securities Inc. and certain of its affiliates, on the one hand, and Midland Loan Services, a Division of PNC Bank, National Association, on the other hand, Midland Loan Services, a Division of PNC Bank, National Association acts as interim servicer with respect to certain of the mortgage loans to be contributed to the securitization by UBS Real Estate Securities Inc.
   
  Pursuant to a certain interim servicing agreement between Bank of America, National Association and certain of its affiliates, on the one hand, and Wells Fargo Bank, National Association, on the other hand,
   

 

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  Wells Fargo Bank, National Association acts as interim servicer with respect to certain of the mortgage loans to be contributed to the securitization by Bank of America, National Association.
   
  It is anticipated that on the closing date (i) entities managed by Ellington Management Group, LLC or an affiliate thereof will purchase approximately 75.0% of each class of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G and Class H Certificates (and may in the future purchase other classes of certificates), (ii) LNR Securities Holdings, LLC or an affiliate thereof will purchase approximately 25.0% of each class of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G and Class H Certificates (and may in the future purchase other classes of certificates), and (iii) Ellington Management Group, LLC or an affiliate thereof will be the initial controlling class representative. LNR Partners, LLC, the special servicer, assisted Ellington Management Group, LLC and LNR Securities Holdings, LLC with due diligence relating to the mortgage loans included in the mortgage pool.
   
  An affiliate of the depositor may purchase less than 50% of each such class upon the initial issuance thereof or thereafter;however, such affiliate will not be entitled to act as or appoint the controlling class representative, and any certificates held by such affiliate will not be considered to be outstanding for purposes of determining the identity of the controlling class representative.
   
  An affiliate of LNR Partners, LLC, the special servicer currently has an equity interest in the borrower under the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments, representing approximately 0.7% of the initial pool balance, which is currently serviced as an excluded mortgage loan pursuant to the pooling and servicing agreement for the MSBAM 2015-C23 securitization.
   
  These roles and other potential relationships may give rise to conflicts of interest as further described in this free writing prospectus under “Risk Factors—Risks Related to Conflicts of Interest.”
   
Cut-off Date September 1, 2015. For purposes of the information contained in this free writing prospectus (including the appendices to this free writing prospectus), scheduled payments due in September 2015 with respect to mortgage loans not having payment dates on the first day of each month have been deemed received on September 1, 2015, not the actual day or days on which such scheduled payments were due.
   
Closing Date On or about September 24, 2015.
   
Determination Date The eleventh (11th) calendar day of each month, or, if the eleventh (11th) calendar day is not a business day, the next succeeding business day, commencing in October 2015.
   
Distribution Date The fourth (4th) business day after the related determination date, commencing in October 2015. The first distribution date will be October 19, 2015.
   

  

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Record Date With respect to each distribution date, for each class of offered certificates, the close of business on the last business day of the preceding calendar month.
    
Expected Final Distribution Dates The expected final distribution date for each class of offered certificates is set forth on the cover of this free writing prospectus and is the date on which that class is expected to be paid in full (or, in the case of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, the date on which the related notional amount is reduced to zero), assuming no delinquencies, losses, modifications, extensions of maturity dates, repurchases or prepayments of the mortgage loans after the initial issuance of the certificates and according to the structuring assumptions described under “Yield, Prepayment and Maturity Considerations—Weighted Average Life” in this free writing prospectus. Any mortgage loans with anticipated repayment dates are assumed to repay in full on those dates. The actual final distribution date for any class of offered certificates may be earlier or later (and could be substantially later) than the expected final distribution date.
    
Rated Final Distribution Date As to each class of offered certificates, the distribution date in September 2048.
    
Collection Period Amounts available for payment on the certificates on any distribution date will depend on the payments and other collections received, and any advances of payments due, on or with respect to the mortgage loans during the related collection period. Each collection period:
    
  ·will relate to a particular distribution date;
    
  ·will be approximately one month long;
    
  ·will begin when the prior collection period ends or, in the case of the first collection period, will begin on the day following the cut-off date; and
    
  ·will end at the close of business on the determination date immediately preceding the related distribution date.
    
Interest Accrual Period The amount of interest payable with respect to the certificates on any distribution date will be a function of the interest accrued during the related interest accrual period. The interest accrual period for the certificates will be the calendar month immediately preceding the month in which that distribution date occurs.
    
Offered Certificates   
    
General We are offering the following eleven (11) classes of Commercial Mortgage Pass-Through Certificates, Series 2015-UBS7 pursuant to this free writing prospectus: Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class A-S, Class B, Class C and Class D.
    
  The entire series will consist of a total of twenty (20) classes, the following nine (9) of which are not being offered by this free writing prospectus and the attached prospectus: Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G, Class H, Class V and Class R.
   

  

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Certificate Principal Balances  
and Notional Amounts Your certificates will have the approximate aggregate initial certificate principal balance or initial notional amount presented on the cover page of this free writing prospectus, and this certificate principal balance may vary by up to 5% on the closing date. Mortgage loans may be removed from or added to the mortgage pool prior to the closing date within this same maximum permitted variance. Any reduction or increase in the aggregate principal balance of mortgage loans within these parameters will result in changes to the initial certificate principal balance or notional amount, as the case may be, of each class of certificates and to the other statistical data contained in this free writing prospectus.
   
  The certificate principal balance at any time is the maximum amount of principal distributable with respect to a class of certificates and is subject to adjustment on each distribution date to reflect any reductions resulting from (1) distributions of principal to that class or (2) any allocations of losses and, solely in the case of the certificates that are not Control Eligible Certificates, trust advisor expenses in reduction of the certificate principal balance of that class.
   
  The Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates will not have certificate principal balances. Each such class of certificates will instead represent the right to receive distributions of interest accrued on a notional amount as described in this free writing prospectus. The notional amount of the Class X-A Certificates will be equal to the aggregate certificate principal balance of the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates outstanding from time to time. The notional amount of the Class X-B Certificates will be equal to the certificate principal balance of the Class A-S Certificates outstanding from time to time. The notional amount of the Class X-D Certificates will be equal to the certificate principal balance of the Class D Certificates outstanding from time to time. The notional amount of the Class X-E Certificates will be equal to the certificate principal balance of the Class E Certificates outstanding from time to time. The notional amount of the Class X-FG Certificates will be equal to the aggregate certificate principal balance of the Class F and Class G Certificates outstanding from time to time. The notional amount of the Class X-NR Certificates will be equal to the certificate principal balance of the Class H Certificates outstanding from time to time.
   
  Accordingly, the respective notional amounts of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates will, in each case, be reduced on each distribution date by any distributions of principal actually made on, and any losses and/or expenses actually allocated to any related class of the Class A-1, Class A-SB, Class A-3, Class A-4, Class A-S, Class D, Class E, Class F, Class G and/or Class H Certificates, as applicable, and in each case outstanding from time to time.
   
Pass-Through Rates Your certificates will accrue interest at an annual rate called a pass-through rate. The approximate initial pass-through rate for each class of offered certificates is set forth on the cover page of this free writing prospectus.
   

 

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  Interest on the offered certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months, also referred to in this free writing prospectus as a 30/360 basis.
   
  Each class of offered certificates with a principal balance will, at all times, accrue interest at aper annum rate equal to (i) a fixed rate, (ii) a fixed rate subject to a cap equal to the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) or (iii) a rate equal to the weighted average of the net interest rates on the mortgage loans (in each case adjusted, if necessary, to accrue on the basis of a 360-day year consisting of twelve 30-day months) less a specified percentage, which percentage may be zero.
   
  For purposes of calculating the weighted average of the net interest rates on the mortgage loans for a particular distribution date in connection with determining the respective pass-through rates on the certificates (other than the Class V and Class R Certificates): (i) the relevant weighting is based upon the respective stated principal balances (as described under “Description of the Offered Certificates—Pass-Through Rates” in this free writing prospectus) of the mortgage loans as in effect immediately prior to the relevant distribution date, (ii) the mortgage interest rate on each mortgage loan is reduced by the related annual administrative fee rate, which includes the master servicing fee rate, the trust advisor fee rate, the certificate administrator fee rate (which includes the trustee fee rate and the custodian fee rate) and the CREFC® license fee rate, (iii) the mortgage loan interest rates will not reflect any increase therein as a result of a continuing default or, if applicable, a mortgage loan remaining outstanding past its anticipated repayment date (if any), (iv) the mortgage loan interest rates will also be determined without regard to any loan term modifications agreed to by the special servicer or resulting from any borrower’s bankruptcy or insolvency, and (v) if a mortgage loan does not accrue interest on a 30/360 basis, its interest rate for any month will, in general, be deemed to be the rateper annum that, when calculated on a 30/360 basis, will produce the amount of interest that accrues on an actual/360 basis on that mortgage loan in that month, at the related mortgage interest rate minus the related administrative fee rate (taking into account certain interest reserve adjustments for distribution dates in January, February and March).
   
  The pass-through rate for the Class X-A Certificates for any distribution date will equal the weighted average of the applicable Class X strip rates for the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates for such distribution date (weighted on the basis of the respective principal balances of such classes of certificates immediately prior to such distribution date). The pass-through rate for the Class X-B Certificates for any distribution date will equal the Class X strip rate for the Class A-S Certificates for such distribution date. The pass-through rate for the Class X-D Certificates for any distribution date will equal the Class X strip rate for the Class D Certificates for such distribution date. The pass-through rate for the Class X-E Certificates for any distribution date will equal the Class X strip rate for the Class E Certificates for such distribution date. The pass-through rate for the Class X-FG Certificates for any distribution date will equal the weighted average of the applicable Class X strip rates for the Class
   

 

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    F and Class G Certificates for such distribution date (weighted on the basis of the respective principal balances of such classes of certificates immediately prior to such distribution date). The pass-through rate for the Class X-NR Certificates for any distribution date will equal the Class X strip rate for the Class H Certificates for such distribution date.
      
    The applicable Class X strip rate with respect to each class of the Class A-1, Class A-SB, Class A-3, Class A-4, Class A-S, Class D, Class E, Class F, Class G and/or Class H Certificates, as applicable, for any distribution date will be aper annum rate equal to the excess, if any, of (a) the weighted average of the net interest rates on the mortgage loans for such distribution date (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 for such distribution date for such class of certificates. Under no circumstances will any Class X strip rate be less than zero.
      
Distributions   
      
 A.  Amount and Order of   
  Distributions On each distribution date, you will be entitled to receive interest and principal distributed from funds available for distribution from the mortgage loans. Funds available for distribution to the certificates will be net of excess interest, excess liquidation proceeds and specified trust expenses, including all advance reimbursements (with interest) and all servicing fees and expenses, certificate administrator fees (which include the trustee fees and custodian fees) and expenses, special servicer compensation and trust advisor fees (with respect to any trust advisor consulting fee, solely to the extent that such fee is actually received from the related borrower) and expenses and CREFC® license fees as set forth below. Distributions to you will be in an amount equal to your certificate’s interest and principal entitlement, subject to:
      
    (i)payment of the respective interest entitlement for any other class of certificates bearing an earlier alphanumeric designation (except in respect of the distribution of interest among the Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, which will have the same senior priority and be distributedpro rata, and which will have the same senior priority and be distributedpro rata); and
      
    (ii)if applicable, payment of the respective principal entitlement for the distribution date to the outstanding classes of principal balance certificates,first, to the Class A-SB Certificates, until the principal balance of such class has been reduced to the planned principal balance for the related distribution date set forth on APPENDIX VII hereto,then, to the Class A-1 Certificates, to the Class A-3 Certificates, to the Class A-4 Certificates and to the Class A-SB Certificates, in that order, until the principal balance of each such class has been reduced to zero (or, if the principal balance of each class of principal balance certificates other than the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates has been reduced to zero as a result of the allocation of mortgage loan losses or trust advisor expenses to those certificates, or if the aggregate
      

 

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     appraisal reduction equals or exceeds the aggregate certificate principal balance of the Class A-S through Class H Certificates, then on apro rata basis among the holders of the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates), andthen, to the Class A-S, Class B, Class C, Class D, Class E, Class F, Class G and Class H Certificates, in that order, until the principal balance of each such class has been reduced to zero; and the allocation of trust advisor expenses,first, to reduce payments of interest on the Class D, Class C and Class B Certificates, in that order,second, to reduce payments of principal on the Class D, Class C, Class B and Class A-S Certificates, in that order, andthird, to reduce payments of principal on the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates on apro rata basis.
      
    No trust advisor expenses (other than the trust advisor fee) will be allocated to or otherwise borne by the Control Eligible Certificates. As a result, no class of Control Eligible Certificates will provide protection to the more senior classes of certificates for the purposes of allocating losses based on trust advisor expenses. See “Servicing of the Mortgage Loans—The Trust Advisor” and “Description of the Offered Certificates—Distributions—Allocation of Trust Advisor Expenses” in this free writing prospectus.
      
    Each certificateholder will receive its share of distributions on its class of certificates on apro rata basis with all other holders of certificates of the same class. See “Description of the Offered Certificates—Distributions” in this free writing prospectus.
      
 B.Interest and Principal   
  Entitlements A description of the interest entitlement, if any, payable to each class is presented under “Description of the Offered Certificates—Distributions” in this free writing prospectus. As described in that section, there are circumstances relating to the timing of prepayments in which your interest entitlement for a distribution date could be less than one full month’s interest at the pass-through rate on your certificate’s principal balance. In addition, the right of the master servicer, the special servicer and the trustee to reimbursement for payment of advances (with interest thereon) and the right of such parties, the certificate administrator, the custodian and, subject to certain limitations, the trust advisor to the payment of compensation and reimbursement of certain costs and expenses will be prior to your right to receive distributions of principal or interest. In addition, the right of the trust advisor to receive reimbursement of trust advisor expenses will be senior to the right of the holders of the Class B, Class C and Class D Certificates to receive payments of interest, and to the right of the holders of the Class A-1, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D Certificates to receive payments of principal. The Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG, Class X-NR Class V and Class R Certificates will not be entitled to principal distributions.
      
    The total amount of principal required to be distributed on the classes entitled to principal on a particular distribution date will, in general, subject to adjustment for trust advisor indemnifications and expenses,
     

 

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    nonrecoverable advances and workout-delayed reimbursement amounts, be equal to the sum of:
      
    ·the principal portion of all scheduled payments, other than balloon payments, to the extent received during the related collection period or advanced by the master servicer or other party (in accordance with the pooling and servicing agreement) in respect of such distribution date;
      
    ·all principal prepayments and, to the extent not previously advanced, the principal portion of balloon payments received during the related collection period;
      
    ·the principal portion of other collections on the mortgage loans received during the related collection period (for example, liquidation proceeds, condemnation proceeds, insurance proceeds and income on “real estate owned”), net of any portion thereof that constitutes late collections of principal in respect of the related mortgage loan as to which there is an outstanding advance; and
      
    ·the principal portion of proceeds of mortgage loan repurchases received during the related collection period, net of any portion thereof that constitutes late collections of principal in respect of the related mortgage loan as to which there is an outstanding advance.
      
    See the definition of “Principal Distribution Amount” under “Description of the Offered Certificates—Distributions” in this free writing prospectus.
      
 C.Servicing and   
  Administration Fees The master servicer and the special servicer are entitled to a master servicing fee and a special servicing fee, respectively, payable from general collections on the mortgage loans, the serviced companion loans and any B notes serviced under the pooling and servicing agreement for this securitization (each such B note sometimes being referred to in this free writing prospectus as a “serviced B note”). The master servicing fee for each distribution date is calculated based on the outstanding principal balance of each mortgage loan and any related serviced B note or serviced companion loan (and in each case including any deemed mortgage loan, serviced B note or serviced companion loan as to which the related mortgaged property has become an REO property) at a rate equal to:
      
    (i) with respect to each mortgage loan (other than the 261 Fifth Avenue mortgage loan (after the securitization of the relatedpari passu companion loan)), the Charles River Plaza North mortgage loan, The Mall of New Hampshire mortgage loan and the Aviare Place Apartments mortgage loan), 0.0050%per annum,
      
    (ii) with respect to the Charles River Plaza North mortgage loan and The Mall of New Hampshire mortgage loan, 0.0050%per annum,
      
    (iii) with respect to the 261 Fifth Avenue mortgage loan (after the securitization of the relatedpari passu companion loan) and the Aviare Place Apartments mortgage loan, 0.0025%per annum,
     

 

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  (iv) with respect to the 200 Helen Street B Note, 0.0050%per annum; and
   
  (v) with respect to the 261 Fifth Avenue companion loan (prior to the securitization thereof) and the WPC Department Store Portfolio companion loans, 0.0050%per annum.
   
  In addition:
   
  (i) the master servicer under the securitization of the 261 Fifth Avenue companion loan (after the securitization of the relatedpari passu companion loan) will be entitled to apari passu primary servicing fee in respect of the 261 Fifth Avenue mortgage loan, calculated at a rate not to exceed 0.0050%per annum,
   
  (ii) the master servicer under the CSAIL 2015-C3 transaction will be paid the relatedpari passu loan primary servicing fee in respect of the Charles River Plaza North mortgage loan and The Mall of New Hampshire mortgage loan (calculated at 0.0025%per annum), and
   
  (iii) the master servicer under the MSBAM 2015-C23 transaction will be paid the relatedpari passu loan primary servicing fee in respect of the Aviare Place Apartments mortgage loan (calculated at 0.0050%per annum).
   
  The special servicing fee for each distribution date is calculated based on the outstanding principal balance of each mortgage loan (other than any non-serviced mortgage loan), serviced B note and serviced companion loan that is being specially serviced or as to which the related mortgaged property has become an REO property, at the special servicing fee rate, which is equal to 0.25%per annum or, if such rate would result in a special servicing fee that would be less than $2,000 in any given month, such higher rate as would result in a special servicing fee equal to $2,000 for such month. Any primary servicing fee or sub-servicing fee (other than with respect to any non-serviced mortgage loan) will be paid by the master servicer or special servicer, as applicable, out of the fees described above. The master servicer and special servicer are also entitled to additional fees and amounts, including, without limitation, income on the amounts held in permitted investments. The special servicer will also be entitled, except in connection with non-serviced mortgage loans, to (i) liquidation fees generally equal to 1.0% of liquidation proceeds in respect of a specially serviced mortgage loan (and any related serviced B note or serviced companion loan) or REO property and (ii) workout fees generally equal to 1.0% of interest and principal payments made in respect of a rehabilitated mortgage loan (and any related serviced B note or serviced companion loan), subject to a cap with respect to each such fee of $1,000,000 with respect to any mortgage loan, loan pair, non-serviced loan combination, A/B whole loan or REO property and subject to certain adjustments and exceptions as described herein under “Servicing of the Mortgage Loans—The Special Servicer—Special Servicer Compensation.” The special servicer under any securitization of the 261 Fifth Avenue companion loan is expected to be, and the special servicer under the CSAIL 2015-C3 securitization (with respect to the Charles River Plaza North mortgage loan and The Mall of New

 

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  Hampshire mortgage loan) and the special servicer under the MSBAM 2015-C23 securitization (with respect to the Aviare Place Apartments mortgage loan) will be, entitled to similar compensation if the related mortgage loan becomes specially serviced or if the related mortgaged property becomes REO property, although in any such case any related fees may accrue at a different rate and there may be a higher cap (or no cap) on workout fees and/or liquidation fees.
   
  The trust advisor will be entitled to the trust advisor fee for each distribution date, calculated based on the outstanding principal balance of each mortgage loan (other than any non-serviced mortgage loan and the 261 Fifth Avenue mortgage loan) in the issuing entity at the trust advisor fee rate, which will equal 0.00195%per annum. In addition, the trust advisor will be entitled to a consulting fee equal to $10,000 (or such lesser amount as the related borrower agrees to pay) with respect to each major decision relating to a mortgage loan (other than any non-serviced mortgage loan), A/B whole loan or loan pair as to which the trust advisor has consultation rights, in each case to the extent that such fee is actually received from the related borrower;provided, that the aggregate amount of such consulting fees with respect to any such mortgage loan, A/B whole loan or loan pair, as applicable, will not exceed $10,000 in any calendar year. See “Servicing of the Mortgage Loans—The Trust Advisor” in this free writing prospectus.
   
  The certificate administrator is entitled to a certificate administrator fee payable from general collections on the mortgage loans, which for each distribution date is calculated on the outstanding principal balance of each mortgage loan at the certificate administrator fee rate, which is equal to 0.0041%per annum. The trustee fee and the custodian fee for each distribution date is a portion of the certificate administrator fee.
   
  A license fee equal to 0.0005%per annum (calculated on the outstanding principal balance of each mortgage loan) will be payable to CREFC® from general collections on the mortgage loans (to the extent any funds are remaining in the collection account after the payment of fees and expenses to the trustee, the certificate administrator, the master servicer, the special servicer and the trust advisor).
   
  Each of the master servicing fee, the special servicing fee, the trust advisor fee, the certificate administrator fee and the CREFC® license fee will be calculated on the same interest accrual basis as is interest on the related mortgage loan and will be prorated for any partial period. Such fees, as well as the liquidation fee, the workout fee and the trust advisor consulting fee (to the extent that such fee is actually received from the related borrower), will be paid from the collection account prior to distributions to certificateholders of the available distribution amount as described under “Servicing of the Mortgage Loans—Withdrawals from the Collection Account” and “Transaction Parties—The Trustee,” “The Trustee, Certificate Administrator and Custodian,” “—The Master Servicer,” “—The Special Servicer” and “—The Trust Advisor” in this free writing prospectus. All of the parties to the pooling and servicing agreement will also have certain rights to reimbursement for certain expenses by the issuing entity. See “Servicing of the Mortgage Loans—The Master Servicer—Master Servicer Compensation,” “—The Special Servicer—Special Servicer Compensation,” “Description of the Offered Certificates— Matters

 

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    Regarding the Certificate Administrator” and “Description of the Offered Certificates—The Trustee—Trustee Compensation” in this free writing prospectus.
     
    The administrative fee rate will be the sum of the master servicing fee rate, the trust advisor fee rate, the certificate administrator fee rate and the CREFC® license fee rate, and is set forth on APPENDIX I to this free writing prospectus for each mortgage loan. The administrative fee rate with respect to any non-serviced mortgage loan will also include any servicing fee payable to the applicable servicer under the related pooling and servicing agreement.
     
 D.Amortization, Liquidation  
  

    and Payment Triggers

 

 Because of losses on the underlying mortgage loans and/or default-related or other unanticipated expenses of the issuing entity, the certificate principal balances of the Class A-S through Class H Certificates could be reduced to zero, or because of a decline in mortgaged property values, the aggregate appraisal reduction may equal or exceed the aggregate certificate principal balance of the Class A-S through Class H Certificates, in any event at a time when the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates, or any two or more classes of those certificates, remain outstanding. Under those circumstances, any distributions of principal on the outstanding Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates will be made on apro rata basis, rather than sequentially, in accordance with their respective certificate principal balances.
     
 E.Prepayment Premiums/  
 

    Yield Maintenance Charges

 

 The manner in which any prepayment premiums and yield maintenance charges received in respect of the mortgage loans during a particular collection period will be allocated to the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and/or Class X-NR Certificates, on the one hand, and the classes of certificates entitled to principal (other than the Control Eligible Certificates), on the other hand, as well as between the various classes of certificates entitled to principal (other than the Control Eligible Certificates), is described in “Description of the Offered Certificates—Distributions” in this free writing prospectus.
     
 F.Excess Interest On each Distribution Date, any collections of “excess interest” on mortgage loans with anticipated repayment dates (that is, certain additional interest that accrues if the mortgage loan is not repaid in full by its anticipated repayment date) will be distributed to the holders of the Class V Certificates on the related distribution date. Excess interest will not be available to make distributions to any other class of certificates or to provide credit support for other classes of certificates or offset any interest shortfalls or to pay any other amounts to any other party under the pooling and servicing agreement.
     
Subordination  
     
 A.General The chart below describes the manner in which the rights of various classes will be senior to the rights of other classes. Entitlement to receive principal and interest (other than excess liquidation proceeds and certain excess interest in connection with any mortgage loan having an anticipated repayment date) on any distribution date is depicted in descending order. The manner in which mortgage loan

 

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  losses are allocated is depicted in ascending order (including interest losses, other than losses with respect to certain “excess interest” in connection with any mortgage loan having an anticipated repayment date).
    
    
    
  No other form of credit enhancement will be available to you as a holder of certificates.
    
  *Interest only certificates. No principal payments or realized loan losses in respect of principal will be allocated to the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG or Class X-NR Certificates. However, mortgage loan losses will reduce the notional amount of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG or Class X-NR to the extent such losses reduce the principal amount of the related classes of principal balance certificates.
    
  **Other than the Class X-E, Class X-FG or Class X-NR, Class V and Class R Certificates. The Class V and Class R Certificates will not be entitled to distributions of principal and interest (other than, with respect to the Class V Certificates, certain excess interest) and will be entitled to receive only such distributions as are described under “Description of the Offered Certificates—Distributions” in this free writing prospectus.
    
  Principal losses on the mortgage loans allocated to a class of certificates will reduce the certificate principal balance of such class. No such losses will be allocated to the Class V, Class R, Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG or Class X-NR Certificates, although loan losses will reduce the respective notional amounts of the Class X-A Certificates (to the extent such losses are allocated to the Class A-1, Class A-SB, Class A-3 or Class A-4 Certificates), the Class X-B Certificates (to the extent such losses are allocated to the Class A-S Certificates), the Class X-D Certificates (to the extent such losses are allocated to the Class D Certificates), the Class X-E Certificates (to the extent such losses are allocated to the Class E Certificates), the Class X-FG Certificates (to the extent such losses are allocated to the Class F and Class G Certificates) and the Class X-NR Certificates (to the extent such losses are allocated to the Class H Certificates) and, therefore, the amount of interest they accrue. To the extent funds are available on a subsequent distribution date for distribution on your certificates, you will be reimbursed for any losses allocated to your certificates with interest at the pass-through rate on your certificates.

  

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    In addition, any trust advisor expenses that are in excess of trust advisor expenses that are allocated to reduce the payment of interest on the Class B, Class C and Class D Certificates will be allocated to reduce the principal balances of the certificates in the following order: to the Class D, Class C, Class B and Class A-S Certificates, in each case, until the remaining principal balance of such class of certificates has been reduced to zero. Following the reduction of the principal balances of the foregoing classes of principal balance certificates to zero, such excess trust advisor expenses will then be allocated among the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates,pro rata (based upon their respective certificate principal balances), until the remaining certificate principal balances of such classes of certificates have been reduced to zero.
     
    In addition to losses caused by mortgage loan defaults, shortfalls in payments to holders of certificates may occur as a result of the master servicer’s, the special servicer’s and the trustee’s right to receive payments of interest on unreimbursed advances (to the extent not covered by default interest and late payment charges or certain other fees paid by the related borrower or other borrowers that are not paid to the master servicer or the special servicer as compensation or, in the case of the Charles River North non-serviced loan combination or 200 Helen Street A/B Whole Loan, borne by the related B note(s)), the special servicer’s right to compensation with respect to mortgage loans which are or have been serviced by the special servicer, a modification of a mortgage loan’s interest rate or principal balance or as a result of other unanticipated expenses of the issuing entity. These shortfalls, if they occur, would reduce distributions to the classes of certificates with the lowest payment priorities. In addition, prepayment interest shortfalls that are not covered by certain compensating interest payments made by the master servicer are required to be allocated to all of the classes of interest-bearing certificates, on apro rata basis, to reduce the amount of interest payable on such certificates.
     
    Notwithstanding the foregoing, upon liquidation of any mortgage loan, all liquidation proceeds, net of unreimbursed advances and interest thereon, servicing compensation, and other amounts payable or reimbursable therefrom, will be applied so that amounts allocated as a recovery of accrued and unpaid interest will not, in the first instance, include any amount by which the interest portion of P&I advances previously made was reduced as a result of appraisal reductions. After the adjusted interest amount is so allocated, any remaining net liquidation proceeds will be allocated to pay principal on the mortgage loan until the unpaid principal amount of the mortgage loan has been reduced to zero. Any remaining liquidation proceeds would then be allocated as a recovery of accrued and unpaid interest corresponding to the amount by which the interest portion of P&I advances previously made was reduced as a result of appraisal reductions.
     
 B.Shortfalls in Available Funds The following types of shortfalls in available funds will reduce amounts available for distribution and will be allocated in the same manner as mortgage loan losses:
      
    ·shortfalls resulting from compensation that the special servicer is entitled to receive;

 

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  ·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, late payment charges, excess liquidation proceeds or certain other fees paid by the borrower or other borrowers that are not paid to the master servicer or the special servicer as compensation;
    
  ·shortfalls due to nonrecoverable advances being reimbursed from principal and/or interest collections;
    
  ·shortfalls resulting from items relating to a non-serviced mortgage loan similar to the preceding bullets arising under and pursuant to the pooling and servicing agreement pursuant to which such non-serviced mortgage loan is serviced; and
    
  ·shortfalls resulting from a reduction of a mortgage loan’s interest rate or principal amount by a bankruptcy court or other modification or from other unanticipated, extraordinary or default-related expenses of the issuing entity;
    
  provided, that shortfalls in available funds resulting from any of the foregoing with respect to a loan pair, an A/B whole loan or a non-serviced loan combination may be borne, in whole or in part, by a related serviced companion loan, B note or non-serviced companion loan as and to the extent described under “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” and “—The Non-Serviced Loan Combinations” in this free writing prospectus.
   
 Information About The Mortgage Pool
   
Characteristics of the Mortgage Pool  
     
 A.General All numerical information in this free writing prospectus concerning the mortgage loans is approximate. All weighted average information regarding the mortgage loans reflects the weighting of the mortgage loans based upon their outstanding principal balances as of the cut-off date. With respect to mortgage loans not having due dates on the first day of each month, scheduled payments due in September 2015 have been deemed received on September 1, 2015.
  
  When information presented in this free writing prospectus with respect to mortgaged properties is expressed as a percentage of the initial pool balance, the percentages are based upon the cut-off date principal balances of the related mortgage loans or, with respect to an individual property securing a multi-property mortgage loan (other than through cross-collateralization of that mortgage loan with other mortgage loans), the portions of those loan balances allocated to such properties. The allocated loan amount for each such mortgaged property securing a multi-property mortgage loan is set forth on APPENDIX I to this free writing prospectus.
   
  With respect to mortgage loans that are cross-collateralized and cross-defaulted with one or more other mortgage loans, the information regarding those mortgage loans is presented as if each of them were secured only by the related mortgaged property identified on APPENDIX I to this free writing prospectus, except that loan-to-value

 

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    ratio, debt service coverage ratio, debt yield and cut-off date balance per square foot information is presented for a cross-collateralized group on an aggregate basis in the manner described in this free writing prospectus.
     
    With respect to the 261 Fifth Avenue mortgage loan and the WPC Department Store Portfolio mortgage loan, representing approximately 9.2% and 2.7%, respectively, of the initial pool balance, which are each secured by a mortgaged property that also secures one or morepari passu serviced companion loans that are not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield for such mortgage loans have been calculated based on the subject mortgage loan together with suchpari passu serviced companion loans.
     
    With respect to the Charles River Plaza North mortgage loan, representing approximately 9.6% of the initial pool balance, which is secured by a mortgaged property that also secures two (2)pari passu non-serviced companion loans (evidenced by (3)pari passupromissory notes) and a subordinate non-serviced B note, each of which is not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield for such mortgage loan have been calculated based on the subject mortgage loan together with the relatedpari passunon-serviced companion loan and without regard to the related subordinate non-serviced B note.
     
    With respect to The Mall of New Hampshire mortgage loan and the Aviare Place Apartments mortgage loan, representing approximately 6.6% and 0.7%, respectively, of the initial pool balance, which are each secured by a mortgaged property that also secures one or morepari passu companion loans that are not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield for each such mortgage loan has been calculated based on the subject mortgage loan together with the relatedpari passu companion loan(s).
     
    With respect to the 200 Helen Street mortgage loan, representing approximately 5.5% of the initial pool balance, which is secured by a mortgaged property that also secures a subordinate serviced B note, which is not included in the issuing entity, the debt service coverage ratio, loan-to-value ratio and debt yield for such mortgage loan have been calculated based on the subject mortgage loan without regard to the related subordinate serviced B note.
     
 B.Principal Balances The issuing entity’s primary assets will be fort- two (42) mortgage loans with an aggregate principal balance as of the cut-off date (referred to in this free writing prospectus as the “initial pool balance”) of approximately $757,280,331. It is possible that the initial pool balance will vary by up to 5% on the closing date. As of the cut-off date, the principal balance of the mortgage loans in the mortgage pool ranged from approximately $1,785,000 to approximately $72,884,027, and the mortgage loans had an approximate average balance of $18,030,484.
     
 C.Fee Simple/Leasehold Fifty-three (53) mortgaged properties, representing approximately 90.3% of the initial pool balance by allocated loan amount, are each subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien solely on a fee simple estate in the entire related mortgaged property.
     

  

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    Three (3) mortgaged properties, representing approximately 3.1% of the initial pool balance by allocated loan amount, are each subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien solely on a leasehold estate in the entire related mortgaged property.
     
    One (1) mortgaged property, representing in the aggregate approximately 6.6% of the initial pool balance by allocated loan amount, is subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien on a fee interest in a portion of the related mortgaged property and a leasehold interest in the remaining portion of the related mortgaged property.
     
 D.Property Types The number of mortgaged properties, and the approximate percentage of the initial pool balance secured by, mortgaged properties operated primarily for each indicated purpose are as described in the table below:

          
  Property Type Percentage of
Initial Pool
Balance(1)
 Number of
Mortgaged
Properties
  Office 25.2%  4 
  Retail 20.0%  22 
  Multifamily 19.4%  10 
  Hospitality 17.2%  4 
  Industrial 9.3%  3 
  Self Storage 5.1%  11 
  Mixed Use 2.0%  1 
  Manufactured Housing Community 1.7%  2 

       
      
    (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 (other than by cross-collateralization with another mortgage loan) 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).
      
 E.Property Location The number of mortgaged properties, and the approximate percentage of the initial pool balance secured by mortgaged properties, located in geographic areas with a 5% or greater concentration of mortgaged properties (by allocated loan amount) are as described in the table below:

 

          
  Geographic Area Percentage of
Initial Pool
Balance(1)
 Number of
Mortgaged
Properties
 
  California 25.2% 13  
  Texas 16.6% 8  
  New York 13.9% 2  
  Massachusetts 9.6% 1  
  New Hampshire 6.6% 1  
  New Jersey 5.5% 1  

 

     
     
  (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 (other than by cross-collateralization with another mortgage loan) 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).

 

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    The remaining mortgaged properties are located throughout thirteen (13) other states. None of these property locations has a concentration of mortgaged properties that represents security for more than 4.3% of the initial pool balance.
      
F.

Other Mortgage Loan Features 

 As of the cut-off date, the mortgage loans had the following characteristics:
      
    ·The most recent scheduled payment of principal and interest on any mortgage loan was not thirty (30) days or more past due, and no mortgage loan had been thirty (30) days or more past due in the twelve-month period immediately preceding the cut-off date.
      
    ·Two (2) groups of mortgage loans, representing approximately 3.0% and 0.9%, respectively, of the initial pool balance, were made to the same borrower or to borrowers that are affiliated with one another through partial or complete direct or indirect common ownership and, in general, have related mortgaged properties that are commonly managed. See APPENDIX I to this free writing prospectus.
      
    ·Ten (10) mortgaged properties, representing approximately 16.1% of the initial pool balance by allocated loan amount, are each entirely, or almost entirely, leased to a single tenant.
      
    ·All of the mortgage loans bear interest at fixed rates.
      
    ·Fixed periodic payments on the mortgage loans are generally determined assuming interest is calculated on a 30/360 basis, but interest actually accrues and is applied on certain mortgage loans on an actual/360 basis. Accordingly, there will be less amortization of the principal balance during the term of these mortgage loans, resulting in a higher final payment on these mortgage loans.
      
    ·No mortgage loan permits negative amortization or the deferral of accrued interest (except excess interest that would accrue in the case of any mortgage loan having an anticipated repayment date after the applicable anticipated repayment date for the related mortgage loan).
      
G. Balloon Loans/ARD Loans All of the mortgage loans are “balloon loans.” For purposes of this free writing prospectus, we consider a mortgage loan to be a “balloon loan” if its principal balance is not scheduled to be fully or substantially amortized by the mortgage loan’s stated maturity date or anticipated repayment date, as applicable. As of the cut-off date, one (1) of these balloon loans, representing approximately 9.6% of the initial pool balance, is a mortgage loan that has an anticipated repayment date and provides for an increase in the mortgage rate and/or principal amortization at a specified date prior to stated maturity. Such mortgage loan is structured to encourage the related borrower to repay the mortgage loan in full by the specified date upon which such increase occurs (which is prior to the mortgage loan’s stated maturity date).
     
H.Interest Only Loans As of the cut-off date, eleven (11) mortgage loans, representing approximately 32.1% of the initial pool balance, currently provide for

     
 

 

 

 

 

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monthly payments of interest only for their entire terms to maturity and sixteen (16) mortgage loans, representing approximately 28.3% of the initial pool balance, currently provide for monthly payments of interest only for a portion of their respective terms and then provide for the monthly payment of principal and interest over their respective remaining terms.

      
 I.Prepayment/Defeasance/   
 Property Release Provisions As of the cut-off date, each of the mortgage loans restricted voluntary principal prepayments in one of the following ways:
      
    ·

 

 

 

Thirty (30) mortgage loans, representing approximately 76.4% of the initial pool balance, prohibit voluntary principal prepayments but permit the related borrower, after an initial period of at least two (2) years following the date of initial issuance of the certificates, to defease the mortgage loan prior to the commencement of an open period by pledging to the issuing entity “government securities” as defined in the Investment Company Act of 1940, which may be subject to rating agency approval, and to thereby obtain the release of the mortgaged property (or, in some cases involving a portfolio of mortgaged properties, one or more of those mortgaged properties) from the lien of the mortgage.
      
    ·Ten (10) mortgage loans, representing approximately 17.0% of the initial pool balance, prohibit voluntary principal prepayments during a prepayment lock-out period, and following such period, permit for a specified period prior to the commencement of an open period voluntary principal prepayments if accompanied by a prepayment premium calculated as the greater of a yield maintenance formula and a specified percentage of the amount prepaid as set forth on APPENDIX I to this free writing prospectus.
      
    ·One (1) mortgage loan, representing approximately 5.9% of the initial pool balance, immediately permits voluntary principal prepayments for a specified period if accompanied by a prepayment premium calculated based on a yield maintenance formula and, following such period, then permits an open period.
      
    ·One (1) mortgage loan, representing approximately 0.7% of the initial pool balance, prohibits voluntary principal prepayments during a prepayment lock-out period and, following such period, permits voluntary principal prepayments for a specified period if accompanied by a prepayment premium calculated as the greater of a yield maintenance formula and a specified percentage of the amount prepaid as set forth on APPENDIX I to this free writing prospectus, and after such period, permits for a specified period prior to the commencement of an open period both (i) voluntary principal prepayments if accompanied by a prepayment premium calculated as the greater of a yield maintenance formula and a specified percentage of the amount prepaid as set forth on APPENDIX I to this free writing prospectus and (ii) the related borrower to defease the related mortgage loan by pledging to the issuing entity “government securities” as defined in the Investment Company Act of 1940, which may be subject to rating agency

 

 

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   approval, and to thereby obtain the release of the mortgaged property from the lien of the mortgage.
    
  In addition to the above, the mortgage loans generally (i) permit prepayment at any time (without regard to any lockout period) in connection with casualty or condemnation and certain other matters without payment of a prepayment premium or yield maintenance charge and (ii) provide for a specified period commencing prior to and including the maturity date or the anticipated repayment date during which the related borrower may prepay the mortgage loan without payment of a prepayment premium or yield maintenance charge. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Prepayment Provisions” and “—Material Terms and Characteristics of the Mortgage Loans—Defeasance Loans” in this free writing prospectus. See also APPENDIX I to this free writing prospectus for more details concerning certain of the foregoing provisions including the method of calculation of any prepayment premium or yield maintenance charge, which will vary for any mortgage loan.
   
  Certain of the mortgage loans also provide for releases of portions of the related real estate collateral in connection with a partial prepayment (without regard to any lockout period) or partial defeasance as described below:
   
  ·Two (2) mortgage loans, representing approximately 4.5% of the initial pool balance, allow the release of a portion of the real estate collateral for such mortgage loan through a partial defeasanceprovided that certain conditions are met, after an initial lock-out period of at least two (2) years following the date of the issuance of the certificates, by pledging to the issuing entity “government securities” as defined in the Investment Company Act of 1940 in a specified percentage of the allocated loan amount for the portion of the real estate collateral for such mortgage loan being released.
    
  See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Partial Releases Other Than in Connection with Defeasance” in this free writing prospectus.
   
  In addition, certain mortgage loans permit the free release of outparcels or other portions of the related mortgaged property which were given no value or minimal value in the underwriting process.
   
  Furthermore, with respect to the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, which secures a mortgage loan representing approximately 2.7% of the initial pool balance, the borrower may obtain the release of any individual mortgaged property that is collateral for the related mortgage loan and substitute another property if certain conditions are satisfied. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Partial Releases Other Than in Connection with Defeasance” in this free writing prospectus.
   
  See APPENDIX I to this free writing prospectus for more details concerning certain of the foregoing provisions.

 

 

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 J.Mortgage Loan Ranges  
   and Weighted Averages As of the cut-off date, the mortgage loans had the following additional characteristics:
       
   i.Mortgage Interest Rates Mortgage interest rates ranging from 3.8000%per annum to 5.4070%per annum, and a weighted average mortgage interest rate of approximately 4.3803%per annum.
       
   ii.Original Terms Each original to scheduled maturity (or, if applicable, to an anticipated repayment date) is equal to one hundred twenty (120) months, and the weighted average original term to scheduled maturity (or, if applicable, to an anticipated repayment date) is approximately one hundred twenty (120) months.
       
   iii.Remaining Terms Remaining terms to scheduled maturity (or, if applicable, to an anticipated repayment date) ranging from one hundred ten (110) months to one hundred twenty (120) months, and a weighted average remaining term to scheduled maturity (or, if applicable, to an anticipated repayment date) of approximately one hundred nineteen (119) months.
       
   iv.Remaining  
    Amortization Terms Remaining amortization terms (excluding loans which provide for interest only payments for the entire loan term) ranging from two hundred seventy-five (275) months to three hundred sixty (360) months, and a weighted average remaining amortization term of approximately three hundred thirty-eight (338) months.
       
   v.Loan-to-Value Ratios Loan to value ratios, calculated as described in this free writing prospectus, ranging from 38.0% to 77.4%, and a weighted average loan to value ratio, calculated as described in this free writing prospectus, of approximately 59.2%. For each of the mortgage loans, the loan to value ratio was calculated according to the methodology set forth in this free writing prospectus based on the estimate of value from a third party appraisal, which was generally conducted between September 2014 and August 2015.
       
      See the definition of “Appraised Value” under “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this free writing prospectus. See also “Description of the Mortgage Pool—Assessments of Property Value and Condition—Appraisals” and “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this free writing prospectus.
       
   vi.Debt Service  
    Coverage Ratios Debt service coverage ratios, determined according to the methodology presented in this free writing prospectus, ranging from 1.20x to 4.15x, and a weighted average debt service coverage ratio, calculated as described in this free writing prospectus, of approximately 1.85x. These calculations are based on underwritten net cash flow and actual debt service of the related mortgage loans as described in this free writing prospectus.
       
      See “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this free writing prospectus.

 

 

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   vii.IO Period UW NCF  
    DSCR IO Period UW NCF DSCR, determined according to the methodology presented in this free writing prospectus, ranging from 1.20x to 4.42x, and a weighted average IO Period UW NCF DSCR, calculated as described in this free writing prospectus, of approximately 2.01x. Sixteen (16) mortgage loans, representing approximately 28.3% of the initial pool balance, provide for monthly payments of interest only for a portion of their respective original terms ranging from twenty-four (24) months to eighty-four (84) months and then provide for the monthly payment of principal and interest over their respective remaining terms.
       
      IO Period UW NCF DSCR” means, with respect to the related mortgage loan that has an interest only period that has not expired as of the cut-off date but will expire prior to maturity, a debt service coverage ratio calculated assuming that the amount of the monthly debt service payment considered in the calculation is the average monthly debt service payment during such interest only period. After such interest only period, the debt service coverage ratio will be calculated based on the monthly debt service payments due on such mortgage loan. See “Description of the Mortgage Pool—Additional Mortgage Loan Information” in this free writing prospectus.
       
 K.Modified and Refinanced  
   Mortgage Loans Thirty-five (35) mortgage loans, representing approximately 93.5% of the initial pool balance, were originated in connection with the related borrower’s refinancing of a previous mortgage loan, and seven (7) mortgage loans, representing approximately 6.5% of the initial pool balance, were originated in connection with the related borrower’s acquisition of the related mortgaged property.
       
      See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Modified and Refinanced Mortgage Loans” in this free writing prospectus.
       
 L.Mortgaged Properties 
   with Limited or No 
   Operating History Five (5) of the mortgaged properties, representing approximately 18.8% of the initial pool balance by allocated loan amount, recently opened for business within thirty-six (36) calendar months prior to the Cut-off Date and either have no prior operating history or do not have historical financial information.
       
      Seven (7) of the mortgaged properties, representing approximately 3.1% of the initial pool balance by allocated loan amount, were recently acquired by the related borrower within thirty-six (36) calendar months prior to the cut-off date, and consequently such mortgaged properties do not have, or have limited, historical financial information.
       
      One (1) of the mortgaged properties, representing approximately 0.6% of the initial pool balance by allocated loan amount, does not have, or has limited, historical information because the related mortgaged property was purchased through receivership when occupancy was approximately 46%.
       
      See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Mortgaged Properties with Limited or No Operating History” in this free writing prospectus.

 

 

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 M.Certain Mortgage Loans  
   with Material Lease  
   Termination Options At least three (3) of the ten (10) largest mortgage loans or groups of cross-collateralized mortgage loans by principal balance, representing approximately 18.0% of the initial pool balance, are secured by mortgaged properties that have leases with material early termination options. See “Risk Factors—Risks Related to the Mortgage Loans—Risks of Lease Early Termination Options” and “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Mortgage Loans with Material Lease Termination Options” in this free writing prospectus. See also “Mortgage Loan No. 5 – The Mall of New Hampshire,”Mortgage Loan No. 6 – 651 Brannan Street” and “Mortgage Loan No. 7 – 200 Helen Street” in APPENDIX III to this free writing prospectus.
      
 N.Certain Variances from  
   Underwriting Standards The mortgage loans to be contributed by UBS Real Estate Securities Inc. were originated (or, with respect to the Fountains at Andover mortgage loan, representing approximately 2.9% of the initial pool balance, was originated in conjunction with a third party) in accordance with UBS Real Estate Securities Inc.’s underwriting standards, as set forth under “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators—UBS Real Estate Securities Inc.—UBSRES’ Underwriting Standards—Exceptions” in this free writing prospectus.
      
     The mortgage loans to be contributed by Bank of America, National Association were originated in accordance with Bank of America, National Association’s underwriting, as set forth under “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators—Bank of America, National Association—Bank of America’s Commercial Mortgage Loan Underwriting Standards” in this free writing prospectus.
      
 O.The A/B Whole Loans  
   and Loan Pairs The mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue secures (1) a mortgage loan (referred to in this free writing prospectus as the “261 Fifth Avenue mortgage loan”) with an outstanding principal balance as of the cut-off date of $70,000,000, representing approximately 9.2% of the initial pool balance, and (2) onepari passu promissory note, which is currently held by Bank of America, National Association (referred to in this free writing prospectus as a “serviced companion loan” or, following the securitization thereof, a “non-serviced companion loan”), with an aggregate outstanding principal balance as of the cut-off date of $110,000,000. The 261 Fifth Avenue mortgage loan and the 261 Fifth Avenue companion loan arepari passu in right of payment and are collectively referred to in this free writing prospectus as the “261 Fifth Avenue loan pair” and a “loan pair.”
      
     The mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street secures a mortgage loan representing approximately 5.5% of the initial pool balance as well as a subordinate note (the “200 Helen Street B note” and a “B note”). The 200 Helen Street A/B whole loan will be serviced under the pooling and servicing agreement.

 

 

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     The portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio secures (1) a mortgage loan (referred to in this free writing prospectus as the “WPC Department Store Portfolio mortgage loan” with an outstanding principal balance as of the cut-off date of $20,100,000, representing approximately 2.7% of the initial pool balance, and (2) twopari passu promissory notes, one of which is currently held by the CSAIL 2015-C3 securitization trust and one of which is currently held by UBS Real Estate Securities Inc. (individually and collectively referred to in this free writing prospectus as the “WPC Department Store Portfolio serviced companion loan” and a “serviced companion loan”), with an aggregate outstanding principal balance as of the cut-off date of $37,070,000. The WPC Department Store Portfolio mortgage loan and the WPC Department Store Portfolio non-serviced companion loan are collectively referred to in this free writing prospectus as the “WPC Department Store Portfolio loan pair” and a “loan pair.” The WPC Department Store Portfolio loan pair will be serviced under the pooling and servicing agreement for this securitization.
      
     The WPC Department Store Portfolio mortgage loan is generallypari passu in right of payment with the WPC Department Store Portfolio serviced companion loan.
      
 P.The Non-Serviced  
   Loan Combinations The mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North secures (1) a mortgage loan (referred to in this free writing prospectus as the “Charles River Plaza North mortgage loan”) with an outstanding principal balance as of the cut-off date of $72,884,027, representing approximately 9.6% of the initial pool balance, (2) twopari passu promissory notes, which are currently held by the CSAIL 2015-C3 securitization trust, and onepari passupromissory note, which is currently held by UBS Real Estate Securities Inc., (collectively referred to in this free writing prospectus as the “Charles River Plaza North non-serviced companion loan” and each a “non-serviced companion loan”), with an aggregate outstanding principal balance as of the cut-off date of $137,780,764 and (3) a subordinate B note with an outstanding principal balance as of the cut-off date of $33,945,985 (referred to in this free writing prospectus as the “Charles River Plaza North non-serviced B note” and a “B note”), which is currently held by a third-party investor, Prima Mortgage Investment Trust, LLC. The Charles River Plaza North mortgage loan, the Charles River Plaza North non-serviced companion loan and the Charles River Plaza North non-serviced B note are collectively referred to in this free writing prospectus as the “Charles River Plaza North non-serviced loan combination” and a “non-serviced loan combination.” The Charles River Plaza North non-serviced loan combination will be serviced under the CSAIL 2015-C3 pooling and servicing agreement.
      
     The Charles River Plaza North mortgage loan is generallypari passu in right of payment with the Charles River Plaza North non-serviced companion loan, and the Charles River Plaza North mortgage loan and the Charles River Plaza North non-serviced companion loan are, together, generally senior in right of payment to the Charles River Plaza North Street B note.

 

 

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     The mortgaged property identified on APPENDIX I to this free writing prospectus as The Mall of New Hampshire secures (1) a mortgage loan (referred to in this free writing prospectus as “The Mall of New Hampshire mortgage loan”) with an outstanding principal balance as of the cut-off date of $50,000,000, representing approximately 6.6% of the initial pool balance, and (2) apari passu promissory note, which is currently held by the CSAIL 2015-C3 securitization trust (referred to in this free writing prospectus as “The Mall of New Hampshire non-serviced companion loan” or a “non-serviced companion loan”), with an outstanding principal balance as of the cut-off date of $100,000,000. The Mall of New Hampshire non-serviced loan combination will be serviced under the CSAIL 2015-C3 pooling and servicing agreement. The Mall of New Hampshire mortgage loan and the related serviced companion loan arepari passu in right of payment and are collectively referred to in this free writing prospectus as “The Mall of New Hampshire non-serviced loan combination” or a “non-serviced loan combination.”
      
     The mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments secures (1) a mortgage loan (referred to in this free writing prospectus as the “Aviare Place Apartments mortgage loan”) with an outstanding principal balance as of the cut-off date of $5,472,000, representing approximately 0.7% of the initial pool balance, and (2) apari passu promissory note, which is currently held by the MSBAM 2015-C23 securitization trust (referred to in this free writing prospectus as the “Aviare Place Apartments non-serviced companion loan” or a “non-serviced companion loan”), with an outstanding principal balance as of the cut-off date of $20,850,000. The Aviare Place Apartments non-serviced loan combination will be serviced under the MSBAM 2015-C23 pooling and servicing agreement. The Aviare Place Apartments mortgage loan and the related serviced companion loan arepari passu in right of payment and are collectively referred to in this free writing prospectus as the “Aviare Place Apartments non-serviced loan combination” or a “non-serviced loan combination.”
      
     No other mortgage loans have a companion loan or B note associated with them and, except as described above, all of the mortgage loans are being serviced under the pooling and servicing agreement. Accordingly, there are no other “loan pairs,” “non-serviced loan combinations,” “non-serviced mortgage loans”, “non-serviced companion loans” or “A/B whole loans”.
      
     For additional information regarding each A/B whole loan, loan pair and non-serviced loan combination, if any, see “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” and “—The Non-Serviced Loan Combinations” in this free writing prospectus.
      
Advances  
      
 A.P&I Advances Subject to a recoverability determination described in this free writing prospectus, the master servicer (and the trustee, if applicable) will be required to advance delinquent monthly mortgage loan payments for mortgage loans (including any non-serviced mortgage loans) that are included in the issuing entity (net of related master servicing fees). The master servicer and the trustee willnot be required to advance any

 

 

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    additional interest accrued as a result of the imposition of any default rate or any rate increase after an anticipated repayment date. The master servicer and the trustee also arenot required to advance prepayment premiums, yield maintenance charges or balloon payments. In addition, the master servicer and the trustee will not be required to make any advance for delinquent mortgage loan payments on any B note, serviced companion loan or non-serviced companion loan. With respect to any balloon payment, the master servicer (and the trustee, if applicable) will instead be required to advance an amount equal to the scheduled payment that would have been due if the related balloon payment had not become due. If a P&I advance is made, the master servicer will defer rather than advance its master servicing fee, but will advance the trust advisor fee (but not any trust advisor consulting fee), the certificate administrator fee and the CREFC® license fee.
      
     For an REO property, subject to a recoverability determination described in this free writing prospectus, the required P&I advance will equal the scheduled payment that would have been due if the predecessor mortgage loan had remained outstanding and continued to amortize in accordance with its amortization schedule in effect immediately before the REO property was acquired (net of related master servicing fees).
      
 B.Servicing Advances Subject to a recoverability determination described in this free writing prospectus, with respect to each mortgage loan (other than any non-serviced mortgage loan) and any related B note or serviced companion loan, the master servicer and/or the trustee may also make servicing advances to pay delinquent real estate taxes, insurance premiums and similar expenses necessary to protect, lease, manage and maintain the mortgaged property, to maintain the lien on the mortgaged property or to enforce the mortgage loan documents. In addition, the special servicer may, but is not required to, make servicing advances on an emergency basis. Notwithstanding the foregoing, with respect to any non-serviced mortgage loan, which will be serviced pursuant to the terms of the pooling and servicing agreement for another securitization, the master servicer, special servicer and trustee under such other securitization will be the parties required or permitted, as applicable, to make such servicing advances.
     
 C.Interest on Advances All advances made by the master servicer, the special servicer or the trustee will accrue interest at a rate equal to the “prime rate” as reported inThe Wall Street Journal. All servicing advances made by the applicable master servicer, special servicer or trustee with respect to a non-serviced mortgage loan under a pooling and servicing agreement pursuant to which the related non-serviced loan combination is being serviced will also accrue interest at a rate equal to the “prime rate” as reported inThe Wall Street Journal.
     
 D.Back-up Advances Pursuant to the requirements of the pooling and servicing agreement, if the master servicer fails to make a required advance, the trustee will be required to make the advance, subject to the same limitations, and with the same rights, as the master servicer.
     
 E.Recoverability None of the master servicer, the special servicer or the trustee will be required to make any advance if the master servicer, the special servicer or the trustee, as the case may be, reasonably determines that the advance would not be recoverable out of collections on the related

 

 

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     mortgage loan (or, in the case of servicing advances made on any A/B whole loan or loan pair, out of collections on such A/B whole loan or loan pair, as applicable). In addition, the master servicer and the trustee may not make any advance if the special servicer determines in accordance with the servicing standard that such advance, if made, would be nonrecoverable. The master servicer’s or special servicer’s determination of nonrecoverability will be conclusive and binding upon the certificateholders and the trustee. The trustee will be entitled to rely conclusively on any determination by the master servicer or special servicer of nonrecoverability, and the master servicer will be entitled to rely conclusively on any determination by the special servicer of nonrecoverability, with respect to any advance.
      
 F.Advances During an  
   Appraisal Event The occurrence of certain adverse events affecting a mortgage loan will require the special servicer to obtain a new appraisal or other valuation of the related mortgaged property. In general, if the principal amount of a mortgage loan plus all other amounts due under the mortgage loan and interest on advances made with respect to the mortgage loan exceeds 90% of the value of the mortgaged property determined by an appraisal or other valuation, an appraisal reduction may be created in the amount of the excess as described in this free writing prospectus. If an appraisal reduction exists for any mortgage loan, the interest portion of the amount required to be advanced on that mortgage loan will be reduced in the same proportion that the appraisal reduction bears to the stated principal balance of the related mortgage loan. This will reduce the funds available to pay interest on the most subordinate class or classes of certificates then outstanding.
      
     If there are any A/B whole loans or loan pairs related to the issuing entity, any appraisal reduction will be calculated in respect of such A/B whole loan or loan pair taken as a whole. With respect to an A/B whole loan, any such appraisal reduction will be allocated first to the related B note and then to the related A note. With respect to a loan pair, any such appraisal reduction will be allocated between the mortgage loan and the related serviced companion loan on apro rata basis by unpaid principal balance. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs.”
      
     If there are any non-serviced mortgage loans included in the mortgage pool, any appraisal reduction in respect of such non-serviced mortgage loan will be calculated by the applicable servicer under, and will be allocated as set forth in, the related non-serviced mortgage loan pooling and servicing agreement. See “Description of the Mortgage Pool—Non-Serviced Loan Combinations” in this free writing prospectus.
      
     See “Description of the Offered Certificates—Advances” and “—Appraisal Reductions” in this free writing prospectus.
      
 Additional Aspects of Certificates
      
Ratings The certificates offered to you will not be issued unless each of the classes of certificates being offered by this free writing prospectus receives the respective ratings identified on the cover page of this free writing prospectus from Fitch Ratings, Inc., Kroll Bond Rating

 

 

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    Agency, Inc., Moody’s Investors Service, Inc. and Morningstar Credit Ratings, LLC.
     
    A rating agency may lower or withdraw a security rating at any time. Each of the rating agencies engaged by the depositor is expected to perform ratings surveillance with respect to its ratings for so long as the certificates remain outstanding, except that a rating agency may stop performing ratings surveillance at any time if, among other reasons, that rating agency does not have sufficient information to allow it to continue to perform ratings surveillance on the certificates. The depositor has no ability to ensure that any rating agencies will perform ratings surveillance.
     
    Additionally, nationally recognized statistical rating organizations that we have not engaged to rate the certificates may nevertheless issue unsolicited credit ratings on one or more classes of the certificates and any one or more of the rating agencies engaged by the depositor to rate certain classes of certificates may issue unsolicited credit ratings on one or more classes of certificates that it was not engaged to rate upon initial issuance, in each case relying on information they receive pursuant to Rule 17g-5 under the Securities Exchange Act of 1934, as amended, or otherwise. If any such unsolicited ratings are issued with respect to any particular class of certificates, we cannot assure you that they will not be lower than the rating(s) assigned by any of the rating agencies engaged by the depositor to rate that class of certificates on the closing date. The issuance of any such unsolicited ratings with respect to any particular class of certificates that are lower than the rating(s) assigned to it by any of the engaged rating agencies on the closing date may negatively impact the liquidity, market value and regulatory characteristics of that class of certificates. Although unsolicited ratings may be issued by any rating agency, a rating agency might be more likely to issue an unsolicited rating if it was not selected after having provided preliminary feedback to the depositor.
     
    As part of the process of obtaining ratings for the certificates, the depositor had initial discussions with and submitted certain materials to DBRS, Inc., Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc. and Morningstar Credit Ratings, LLC. Based on preliminary feedback from those rating agencies at that time, the depositor selected four (4) of them to rate some or all of the classes of offered certificates and certain classes of the privately offered certificates (although each such engaged rating agency may not ultimately issue ratings on all classes of certificates). The decision not to engage certain rating agencies to rate any of the certificates was due, in part, to those agencies’ initial subordination levels for the various classes of rated certificates. Likewise, the decision to engage one or more of Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc. and Morningstar Credit Ratings, LLC to only rate certain classes of certificates, but not others, was also due, in part, to those engaged rating agencies’ initial subordination levels for such classes of certificates. Had the depositor selected other rating agencies to rate the offered certificates, or had it engaged Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc. and/or Morningstar Credit Ratings, LLC, as applicable, to rate those other classes of certificates, the depositor cannot assure you as to the ratings that such rating agencies would have ultimately been assigned

 

 

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    to those classes of certificates. In addition, the decision not to engage one or more of Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc. and Morningstar Credit Ratings, LLC in the rating of certain classes of certificates to be issued in connection with this transaction may negatively impact the liquidity, market value and regulatory characteristics of those classes of certificates. Neither the depositor nor any other person or entity will have any duty to notify you if any other nationally recognized statistical rating organization issues, or delivers notice of its intention to issue, unsolicited ratings on one or more classes of the offered certificates after the date of this free writing prospectus.
     
    Furthermore, the Securities and Exchange Commission may determine that one or more of the rating agencies engaged by the depositor no longer qualifies as a nationally recognized statistical rating organization, or is no longer qualified to rate the certificates, and that determination may have an adverse effect on the liquidity, market value and regulatory characteristics of the certificates.
     
    The security ratings do not address the frequency of prepayments (whether voluntary or involuntary) of mortgage loans, or the degree to which the prepayments might differ from those originally anticipated, or the likelihood of collection of default interest, excess interest, late payment charges, prepayment premiums or yield maintenance charges, or the tax treatment of the certificates.
     
    See “Risk Factors” and “Yield, Prepayment and Maturity Considerations” in this free writing prospectus. Also see “Ratings” in this free writing prospectus and “Rating” in the attached prospectus for a further 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.
     
    Important Disclaimer: Credit ratings are forward-looking opinions about credit risk and express a rating agency’s opinion about the ability and willingness of an issuer of securities to meet its financial obligations in full and on time. Ratings are not indications of investment merit and are not buy, sell, or hold recommendations, a measure of asset value, or an indication of the suitability of an investment.
     
Repurchase or Substitution Each mortgage loan seller will make those certain representations and warranties listed in APPENDIX V to this free writing prospectus with respect to the mortgage loans sold by it, as described under “Description of the Mortgage Pool—Representations and Warranties” and “—Repurchases and Other Remedies.” If a mortgage loan seller has been notified of a material breach of any of its representations and warranties or a material defect in the documentation of any mortgage loan as described under “Description of the Mortgage Pool—Repurchases and Other Remedies,” then that mortgage loan seller will be required to either cure the breach, repurchase the affected mortgage loan from the issuing entity or replace the affected mortgage loan with another mortgage loan. Any such repurchase would have the same effect on the offered certificates as a prepayment in full of such mortgage loan, except that the purchase will not be accompanied by any prepayment premium or yield maintenance charge. In addition, certain mortgage loans may be purchased from the issuing entity by the

 

 

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    holder of a B note, serviced companion loan, non-serviced companion loan or mezzanine loan under certain circumstances. See “Risk Factors—Risks Related to the Offered Certificates—Mortgage Loan Sellers May Not Make a Required Repurchase or Substitution of a Defective Mortgage Loan” and “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Subordinate and Other Financing” in this free writing prospectus.
     
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 (other than any non-serviced mortgage loan) if it determines in accordance with the servicing standard that such a sale would be in the best interests of the certificateholders (as a collective whole as if such certificateholders constituted a single lender), and the special servicer is required to 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, determined as described in “Servicing of the Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties—Sale of Defaulted Mortgage Loans” in this free writing prospectus, unless the special servicer determines, in accordance with the servicing standard, that rejection of such offer would be in the best interests of the certificateholders (as a collective whole). The sale of defaulted mortgage loans (other than any non-serviced mortgage loan) is generally subject to (i) with respect to any mortgage loan that is part of an A/B whole loan or loan pair or any mortgage loan with existing mezzanine debt, to the extent set forth in the related intercreditor agreement, the right of the holder of the related debt held outside the issuing entity to purchase the related mortgage loan, and (ii) any consent or consultation rights of the controlling class representative or, with respect to any mortgage loan that is part of an A/B whole loan or loan pair, the related directing holder (if any), to the extent set forth in the related intercreditor agreement, as further described in this free writing prospectus under “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs.”
     
    With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, if the related non-serviced companion loans or the related B note becomes a defaulted mortgage loan and the special servicer under the CSAIL 2015-C3 pooling and servicing agreement determines to sell such non-serviced companion loans, such special servicer will be required to sell the Charles River Plaza North mortgage loan together with the related non-serviced companion loans as notes evidencing one whole loan, in accordance with the provisions of the related intercreditor agreement and the CSAIL 2015-C3 pooling and servicing agreement. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—The Charles River Plaza North Non-Serviced Loan Combination” in this free writing prospectus.
     
    In addition, with respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, representing approximately 9.2% of the initial pool balance, if such mortgage loan becomes a defaulted mortgage loan and the applicable special servicer determines to sell such mortgage loan,

 

 

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    the applicable special servicer will be required to sell such mortgage loan together with the related serviced companion loan as notes evidencing one whole loan, in accordance with the provisions of the related intercreditor agreement and the pooling and servicing agreement. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The 261 Fifth Avenue Loan Pair” in this free writing prospectus.
     
    With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as The Mall of New Hampshire, representing approximately 6.6% of the initial pool balance, if the related non-serviced companion loan becomes a defaulted mortgage loan and the special servicer under the CSAIL 2015-C3 pooling and servicing agreement determines to sell such non-serviced companion loan, such special servicer will be required to sell the applicable mortgage loan together with the related non-serviced companion loan(s) as notes evidencing one whole loan, in accordance with the provisions of the related intercreditor agreement and the CSAIL 2015-C3 pooling and servicing agreement. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—The Mall of New Hampshire Non-Serviced Loan Combination” in this free writing prospectus.
     
    With respect to the mortgage loans secured by the mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, representing approximately 2.7% of the initial pool balance, if such mortgage loan becomes a defaulted mortgage loan and the special servicer determines to sell such mortgage loan or some of all of the related companion loans, the special servicer will be required to sell such mortgage loan together with the relatedpari passucompanion loans as notes evidencing one whole loan, in accordance with the provisions of the related intercreditor agreement and the applicable pooling and servicing agreement. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The WPC Department Store Portfolio Loan Pair” in this free writing prospectus.
     
    With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments, representing approximately 0.7% of the initial pool balance, if the related non-serviced companion loan becomes a defaulted mortgage loan and the special servicer under the MSBAM 2015-C23 pooling and servicing agreement determines to sell such non-serviced companion loan, such special servicer will be required to sell the Aviare Place Apartments mortgage loan together with the related non-serviced companion loan as notes evidencing one whole loan, in accordance with the provisions of the related intercreditor agreement and the MSBAM 2015-C23 pooling and servicing agreement. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations—Aviare Place Apartments Non-Serviced Loan Combination” in this free writing prospectus.
     
    Pursuant to the pooling and servicing agreement, if title to any REO property is acquired by the issuing entity or its nominee in respect of any mortgage loan (other than any non-serviced mortgage loan), the special servicer is required to use its reasonable best efforts to sell the

 

 

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    REO property for cash as soon as practicable consistent with the requirement to maximize proceeds for all certificateholders (and, with respect to a companion loan or a B note (in each case that is serviced under the pooling and servicing agreement for this securitization), for the certificateholders and the holder of such serviced companion loan or B note, as a collective whole taking into account the subordinate nature of any related B note), but in no event later than three (3) years after the end of the year in which it was acquired, and in any event prior to the rated final distribution date or earlier to the extent necessary to comply with REMIC provisions, unless (i) the trustee or the special servicer has been granted an extension of time by the IRS or is permitted under the REMIC provisions to continue to hold such REO property during the period in which an application for an extension is pending or (ii) the special servicer receives an opinion of counsel that holding such REO property beyond the period specified above will not result in the imposition of taxes on “prohibited transactions” under the REMIC provisions or cause any REMIC to fail to qualify as a REMIC;provided, that in no event may the issuing entity hold any REO property beyond the end of the sixth (6th) calendar year following the end of the year of such REO property’s acquisition. If the special servicer is unable to sell such REO property for cash within such time period (as such period may be extended under certain circumstances), the special servicer will be required, after consultation with the controlling class representative during any Subordinate Control Period and any Collective Consultation Period and, in the case of a sale of any REO property relating to an A/B whole loan or loan pair, the related directing holder to the extent set forth in the related intercreditor agreement, to auction the REO property to the highest bidder (which may be the special servicer or another interested person) in accordance with the servicing standard. See “Servicing of the Mortgage Loans—Sale of Defaulted Mortgage Loans and REO Properties—Sale of REO Properties” in this free writing prospectus.
     
Optional Termination On any distribution date, if the aggregate principal balance of the mortgage loans is less than or equal to 1.0% of the initial pool balance, the holders of a majority of the most subordinate class of certificates (other than the Class V and Class R Certificates) outstanding, the special servicer, the master servicer and any holder of a majority interest in the Class R Certificates, in that order of priority, will have the option to purchase all of the remaining mortgage loans, and all property acquired through exercise of remedies in respect of any mortgage loan, at the price specified in this free writing prospectus. Exercise of this option would terminate the issuing entity and retire the then outstanding certificates.
     
    In addition, if at any time (i) the aggregate certificate principal balances or notional amounts, as applicable, of the Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class A-S, Class B, Class C and Class D Certificates have been reduced to zero and (ii) there is only one holder (or a group of holders acting in unanimity) of all the outstanding certificates (excluding the Class V and Class R Certificates), such certificateholder will have the right to exchange all of its certificates (other than the Class V and Class R Certificates) for the mortgage loans and each REO property remaining in the issuing entity if such certificateholder makes a payment to the master servicer as described under “Description of the Offered Certificates—Optional

 

 

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    Termination” in this free writing prospectus. See “Description of the Offered Certificates—Optional Termination” in this free writing prospectus.
     
Denominations The offered certificates (other than the Class X-A, Class X-B and Class X-D Certificates) will be initially offered and sold in minimum denominations of $10,000 and integral multiples of $1 in excess of $10,000. The Class X-A, Class X-B and Class X-D Certificates will each be initially offered and sold in minimum denominations of $100,000 and integral multiples of $1 in excess of $100,000.
   
Registration, Clearance and  
 Settlement Your certificates will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, and will not be registered in your name. You will not receive a definitive certificate representing your ownership interest, except in very limited circumstances described in this free writing prospectus. As a result, you will hold your certificates only in book-entry form and will not be a certificateholder of record. You will receive distributions on your certificates and reports relating to distributions only through The Depository Trust Company (commonly known as DTC), Clearstream Banking, société anonyme (commonly known as Clearstream) or the Euroclear System (commonly known as Euroclear) or through participants in DTC, Clearstream or Euroclear.
     
    You may hold your certificates through:
      
    ·DTC in the United States; or
      
    ·Clearstream or Euroclear in Europe.
      
    Transfers within DTC, Clearstream or Euroclear will be made in accordance with the usual rules and operating procedures of those systems. Cross-market transfers between persons holding directly through DTC, Clearstream or Euroclear will be effected in DTC through the relevant depositories of Clearstream or Euroclear.
     
    All or any portion of the certificates offered to you may be converted to definitive certificates and reissued to beneficial owners or their nominees, rather than to DTC or its nominee, if we notify DTC of our intent to terminate the book-entry system and, upon receipt of notice of such intent from DTC, the participants holding interests in the certificates agree to initiate such termination.
     
    We expect that the certificates offered to you will be delivered in book-entry form through the facilities of DTC, Clearstream or Euroclear on or about the closing date.
      
Tax Status For federal income tax purposes, the issuing entity will consist of a grantor trust and three real estate mortgage investment conduits, each a REMIC, arranged in a tiered structure (the Upper Tier REMIC, the Middle-Tier REMIC and the Lower Tier REMIC). The Lower Tier REMIC will issue multiple classes of uncertificated, regular interests that will be held by the Middle Tier REMIC, and a single residual interest. The assets of the Lower Tier REMIC will consist of the mortgage loans (other than the entitlement to any Excess Interest (as defined under “Material Federal Income Tax Consequences” in this

 

 

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    free writing prospectus)) and any other assets designated in the pooling and servicing agreement. The Middle-Tier REMIC will issue multiple classes of uncertificated, regular interests that will be held by the Upper-Tier REMIC, and a single residual interest. The Upper Tier REMIC will issue multiple classes of regular interests and a single residual interest. Except for the Class V and Class R Certificates, all of the certificates will represent regular interests in the Upper Tier REMIC.
     
    The Class V Certificates will represent an undivided beneficial ownership interest, held through the grantor trust, in certain excess interest collected on mortgage loans with anticipated repayment dates, if any. The Class R Certificates will represent the beneficial ownership of the residual interest in each of the Lower Tier REMIC, the Middle-Tier REMIC and the Upper Tier REMIC.
     
    The certificates that represent direct ownership of regular interests in the Upper-Tier REMIC are referred to herein as the REMIC Regular Certificates. The REMIC Regular Certificates will be designated as the regular interests in the Upper-Tier REMIC.
     
    Pertinent federal income tax consequences of an investment in the certificates include:
      
    ·the regular interests will be treated as newly originated debt instruments for federal income tax purposes;
      
    ·beneficial owners of regular interests will be required to report income on the regular interests in accordance with the accrual method of accounting;
      
    ·the Class     , Class     and Class     Certificates will be issued at a premium for federal income tax reporting purposes; and
      
    ·the Class     , Class     and Class     Certificates will be issued with more than ade minimis amount of original issue discount for federal income tax reporting purposes.
      
    See “Material Federal Income Tax Consequences” in this free writing prospectus and “Material Federal Income Tax Consequences” in the attached prospectus.
      
Considerations Related to Title I   
 of the Employee Retirement   
 Income Security Act of 1974 Fiduciaries of employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended, commonly known as ERISA, or plans subject to Section 4975 of the Internal Revenue Code of 1986, as amended (referred to herein as the Code), or governmental plans (as defined in Section 3(32) of ERISA) or other plans that are subject to any federal, state, local or non-U.S. law which is, to a material extent, similar to the foregoing provisions of ERISA or the Code, should carefully review with their legal advisors whether the purchase or holding of the certificates could give rise to a transaction prohibited or not otherwise permissible under ERISA, the Code or similar law. The U.S. Department of Labor has granted an administrative exemption to the predecessor of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Prohibited Transaction Exemption

 

 

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   93-31, 58 Fed. Reg. 28620 (May 14, 1993), and to UBS Securities LLC, Prohibited Transaction Exemption 91-22, 56 Fed. Reg. 03277 (April 18, 1991), each as amended by Prohibited Transaction Exemption 2013-08, 78 Fed. Reg. 41090 (July 9, 2013), which may exempt from the application of certain of the prohibited transaction provisions of Section 406 of ERISA and the excise taxes imposed on such prohibited transactions by Code Sections 4975(a) and (b), transactions relating to the purchase, sale and holding of pass-through certificates underwritten by a selling group of which the underwriters serve as a manager or co-manager, and the servicing and operation of related mortgage pools,provided that certain conditions are met. The depositor expects that the exemptions granted to the predecessor of Merrill Lynch, Pierce, Fenner & Smith Incorporated and to UBS Securities LLC will generally apply to the offered certificates,provided that certain conditions are satisfied. See “Certain ERISA Considerations” in this free writing prospectus and “Certain ERISA Considerations” in the attached prospectus.
      
Legal Investment The offered certificates will not constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended. If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities, then you may be subject to restrictions on investment in the offered certificates. You should consult your own legal advisors for assistance in determining the suitability of and consequences to you of the purchase, ownership and sale of the offered certificates.
   
  The issuing entity will not be registered under the Investment Company Act. The issuing entity will be relying on an exclusion or exemption from the definition of “investment company” under the Investment Company Act contained in Section 3(c)(5) of the Investment Company Act or Rule 3a-7 under the Investment Company Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity will not be relying upon Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act as a basis for not registering under the Investment Company Act. The issuing entity is being structured so as not to constitute a “covered fund” for purposes of the Volcker Rule (as defined in this free writing prospectus) under the Dodd-Frank Act.
   
  See “Legal Investment” in this free writing prospectus and in the attached prospectus.

 

 

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Risk Factors

 

You should carefully consider the risks involved in owning a certificate before purchasing an offered certificate. Among other risks, the payments you receive on your certificates will depend on payments received on and other recoveries with respect to the mortgage loans. Therefore, you should carefully consider both the risk factors relating to the mortgage loans and the mortgaged properties and the other risks relating to the offered certificates.

 

The risks and uncertainties described in this section, together with those risks described in the prospectus attached hereto as Exhibit A under “Risk Factors,” summarize material risks relating to your certificates. Additional risks and uncertainties not presently known to us may also impair your investment.

 

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 offered certificates unless you understand and are able to bear the risk of material variability in the yield to maturity and the aggregate amount and timing of distributions on the offered certificates, which gives rise to the potential for significant loss over the life of the offered certificates. An investment in the offered certificates involves substantial risks and uncertainties and should be considered only by sophisticated institutional investors with substantial investment experience with similar types of securities and who have conducted appropriate due diligence on the mortgage loans and the offered certificates.

 

Risks Related to Market Conditions

 

The Volatile Economy and Credit Crisis May Increase Loan Defaults and Affect the Value and Liquidity of Your Investment

 

In recent years, the real estate and securitization markets, including the market for commercial mortgage-backed securities, as well as global financial markets and the economy generally, have experienced significant dislocations, illiquidity and volatility. The United States economic recovery has been weak and may not be sustainable for any specific period of time, and the global or United States economy could slip into an even more significant recession. Declining real estate values, coupled with diminished availability of leverage and/or refinancings for commercial real estate, have 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. Any continued downturn would likely have an adverse effect on commercial mortgage-backed securities that are backed by loans secured by such commercial real estate. In the event of default by borrowers under the mortgage loans, holders of the offered certificates may suffer a partial or total loss of their investment.

 

A substantial amount of United States commercial mortgage loans, with balloon payment obligations in excess of their respective current property values, are maturing in the near future. The lack of credit liquidity, decreases in the value of commercial properties and, in some instances, correspondingly higher mortgage rates have prevented many commercial mortgage borrowers from refinancing their mortgages. These circumstances have increased delinquency and default rates of securitized commercial mortgage loans, and may lead to widespread commercial mortgage defaults, further credit constraints, further declines in property values and further adverse effects on the perception of the value of commercial mortgage-backed securities.

 

In light of the circumstances described above, the risks we described elsewhere under “Risk Factors” in this free writing prospectus and in the prospectus attached hereto as Exhibit A are heightened substantially, and you should review and carefully consider such risk factors in light of such circumstances.

 

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External Factors May Adversely Affect the Value and Liquidity of Your Investment

 

Factors not directly relating to the offered certificates or the underlying mortgage loans may nevertheless cause the market value of the offered certificates to decline even if the offered certificates, the mortgage loans or the mortgaged properties are performing at or above your expectations.

 

Global, National and Local Economic Factors. 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 that participate in the European Monetary Union and whose sovereign debt is generally denominated in euros. 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. 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 Title 11 of the United States Code or by agreement with their creditors. Any of the circumstances described above may lead to further volatility in or disruption of the credit markets.

 

Other Events May Affect Your Investment. Moreover, other types of events may affect general economic conditions and financial markets and therefore may adversely affect the performance of the mortgage loans and the performance of the offered certificates:

 

·Wars, revolutions, insurrections, armed conflicts, terrorism, political crises, natural disasters and man-made disasters may have an adverse effect on the mortgaged properties and/or your certificates.

 

·Trading activity associated with indices of commercial mortgage-backed securities may 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 and multifamily real estate markets and may be affected for reasons that are unknown and cannot be discerned.

 

·The market value of your certificates also may be affected by many other factors, including then-prevailing interest rates and market perceptions of risks associated with commercial mortgage lending. A change in the market value of the certificates may be disproportionately impacted by upward or downward movements in current interest rates.

 

See “Risk Factors—Risks Related to the Offered Certificates—Limited Liquidity and Market Value May Adversely Affect Payments on Your Certificates” below.

 

Risks Related to the Mortgage Loans

 

Your Investment Is Not Insured or Guaranteed and Your Source for Repayments Is Limited to Payments Under the Mortgage Loans

 

Payments under the mortgage loans and the certificates are not insured or guaranteed by any governmental entity or mortgage insurer. Accordingly, the sources for repayment of your certificates are limited to amounts due with respect to the mortgage loans. Payment of amounts due under a mortgage loan prior to its maturity or anticipated repayment date is primarily dependent on the sufficiency of the net operating income of the related mortgaged property. Payment of the balloon payment of a mortgage loan that is a balloon loan at its maturity, or on its anticipated repayment date, is primarily dependent upon the borrower’s ability to sell or refinance the mortgaged property for an amount sufficient to repay the mortgage loan.

 

You should consider all of the mortgage loans to be nonrecourse loans. Even in those cases where recourse to a borrower or guarantor is permitted under the related mortgage loan documents, we have not necessarily undertaken an evaluation of the financial condition of any of these persons. If a default occurs, the lender’s remedies generally

 

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are limited to foreclosing against the specific properties and other assets that have been pledged to secure the mortgage loan. Those remedies may be insufficient to provide a full return on your investment.

 

It is common for non-recourse mortgage loans to provide for certain carveouts to the non-recourse provisions, such as for fraud and other bad acts, among other things. Often, an individual or entity separate from the related borrower will provide a guaranty of payment with respect to the nonrecourse carve-outs. However, such a guaranty may often be limited.

 

In addition, in connection with the origination of certain mortgage loans, the related 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. Such a guaranty may also be permitted in lieu of funding a reserve or providing an irrevocable letter of credit in the future.

 

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. A loan sponsor on a guaranty may be a guarantor of obligations other than related to the mortgage loan. As such, the net worth of a guarantor may be significantly reduced over time. It should also be noted that in most cases, the net worth of a guarantor is less than (and in most cases, significantly less than) the balance of the mortgage loan. Notwithstanding any net worth requirements that may be contained in a guaranty, there can be no assurance that the net worth requirements are adequate to satisfy guaranteed risks. Furthermore, there can be no assurance that a loan sponsor or guarantor will be willing or financially able to satisfy guaranteed obligations.

 

The Repayment of a Commercial Mortgage Loan Is Dependent on the Cash Flow Produced by the Property Which Can Be Volatile and Insufficient to Allow Timely Payment on Your Certificates

 

The mortgage loans are secured by various types of income-producing multifamily, commercial and manufactured housing community properties. Commercial lending is generally thought to expose a lender to greater risk than one-to-four family residential lending because, among other things, it typically involves larger loans.

 

The repayment of a commercial mortgage loan is typically dependent upon the ability of the applicable property to produce cash flow. Repayment of mortgage loans secured by cooperative properties typically depends upon the payments received by the cooperative corporation from its tenants/shareholders. Even the liquidation value of a commercial property is determined, in substantial part, by the amount of the property’s cash flow (or its potential to generate cash flow). However, net operating income and cash flow can be volatile and may be insufficient to cover debt service on the loan at any given time. See “Risk Factors—Risks Associated with Commercial Lending May Be Different than those for Residential Lending” in the prospectus attached hereto as Exhibit A.

 

A decline in the real estate market or in the financial condition of a major tenant will tend to have a more immediate effect on the net operating income of properties with short-term revenue sources (such as short-term or month-to-month leases) and may lead to higher rates of delinquency or defaults under mortgage loans secured by such properties.

 

In addition, underwritten or adjusted cash flows, by their nature, are speculative and are based upon certain assumptions and projections. The failure of any such assumptions or projections in whole or in part could cause the underwritten or adjusted cash flows to vary substantially from the actual net operating income of a mortgaged property. See “—Debt Service Coverage Ratio and Net Cash Flow Information is Based on Numerous Assumptions” below.

 

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 Our Other Trusts

 

As a result of the distinct nature of each pool of commercial mortgage loans and the separate mortgage loans within the pool, this free writing prospectus does not include disclosure concerning the delinquency and loss experience of static pools of periodic originations by the sponsors of commercial mortgage loans (known as “static pool information”). Because of the highly heterogeneous nature of the mortgaged properties securing the mortgage

 

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loans in commercial mortgage-backed securities transactions, static pool information for prior securitized pools, even those involving the same property types (e.g., hotels or office buildings), may be misleading, since the economics of the properties and terms of the loans may be materially different. Therefore, you should evaluate this offering on the basis of the information set forth in this free writing prospectus with respect to the mortgage loans, and not on the basis of any successful performance of other pools of securitized commercial mortgage loans.

 

Certain Mortgage Loans Are Secured By Mortgaged Properties That Have a Limited Operating History or Do Not Have Historical Financial Information

 

100.0% of the mortgage loans were originated within the eleven (11) months prior to the cut-off date.

 

The mortgaged properties securing certain of the mortgage loans are newly constructed, recently opened and/or recently acquired and, as such, have a limited operating history or do not have historical financial information. There can be no assurance that any of the properties, whether newly constructed and/or recently opened or otherwise, will perform as anticipated. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Mortgaged Properties with Limited or No Operating History” in this free writing prospectus.

 

Converting Commercial Properties to Alternative Uses May Require Significant Expenses Which Could Reduce Payments on Your Certificates

 

Some of the mortgaged properties may not be readily convertible to alternative uses if those properties were to become unprofitable for any reason under their current use. For example:

 

·converting commercial properties to alternate uses or converting single-tenant commercial properties to multi-tenant properties generally requires substantial capital expenditures;

 

·a mortgaged property may not be readily convertible due to restrictive covenants related to such mortgaged property, such as use and other restrictions imposed by a condominium declaration or a related ground lease;

 

·certain properties may be subject to certain restrictions in order to remain eligible for low income housing tax credits or governmental subsidized rental payments that could prevent the conversion of the mortgaged property to alternative uses;

 

·zoning or other restrictions, including the designation of a property as a historical landmark, may prevent alternative uses;

 

·movie theater space would not easily be converted to other uses due to the unique construction requirements of movie theaters; and

 

·properties that are legally permitted to be used in a non-conforming manner may be subject to restrictions that would require compliance with current zoning laws, which may include non-operation of the subject property for a period of time.

 

In particular, with respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 651 Brannan Street, representing approximately 5.9% of the initial pool balance, 11.8% of the net rentable square footage of such mortgaged property is operated as a datacenter. Datacenters may have unique risks such as a customized design and infrastructure requirements, rendering such spaces less readily convertible to alternative uses.

 

In particular, with respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street, representing approximately 5.5% of the initial pool balance, 1.6% of the net rentable square footage of such mortgaged property is operated as a laboratory. Laboratories may have unique risks such as a unique construction and infrastructure requirements, rendering such spaces less readily convertible to alternative uses.

 

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With respect to any such mortgaged properties, conversion could result in a significant adverse effect on, or interruption of, the revenues generated by such mortgaged properties. The liquidation value of such a mortgaged property may be substantially less than would be the case if the mortgaged property were readily adaptable to other uses, and as a result, less funds would be available for distributions on your certificates.

 

Certain Risks of Restaurant Tenants. Certain of the mortgaged properties may include tenants that operate as restaurants. Seven (7) mortgaged properties, securing mortgage loans representing approximately 10.4% of the initial pool balance, have a restaurant that is among the five (5) largest tenants at the related mortgaged property. See APPENDIX I to this free writing prospectus. 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.

 

Certain Risks of Medical or Dental Office Tenants. Certain of the mortgaged properties may be operated in whole or in part as medical or dental offices. Four (4) mortgaged properties, securing mortgage loans representing approximately 11.8% of the initial pool balance, have a medical or dental office that is among the five (5) largest tenants at the related mortgaged property. See APPENDIX I to this free writing prospectus. In addition, tenants at certain of the office properties may operate as medical or dental offices. The performance of a medical or dental office property may depend on the proximity of the property to a hospital or other health care 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 or dental office property. In addition, issues related to reimbursement (ranging from nonpayment to delays in payment) from private or government-sponsored insurers could adversely impact cash flow at such mortgaged properties. Moreover, medical or dental office properties may appeal to a narrow market of tenants and the value of such a property may be adversely affected by the availability of competing medical or dental office properties.

 

Certain Risks of Retail Bank Branches. Certain of the mortgaged properties may include tenants that operate as bank branches. One (1) mortgaged property, securing mortgage loans representing approximately 1.3% of the initial pool balance, has a bank branch that is among the five (5) largest tenants at the related mortgaged property. See APPENDIX I to this free writing prospectus. Bank branches are specialty-use properties that are outfitted with vaults, teller counters and other customary installations and equipment that require significant capital expenditures. The ability to lease these properties to entities other than financial institutions may be difficult due to the added cost and time of refitting the properties. Additionally, certain of these mortgaged properties may have been designated as historic or landmark buildings or may be 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.

 

A concentration of leases to banks as to a related mortgage loan or an individual mortgaged property securing a related mortgage loan could have a negative effect on net operating income in the event of a downturn in the banking industry or a shift in the banking industry business model concerning retail branches. Individual banks, as well as the banking industry in general, may be adversely affected by negative economic and market conditions throughout the United States or in the local economies in which regional or community banks operate. In addition, changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System, may have an adverse impact on banks’ loan portfolios and allowances for loan losses. As a result, the mortgaged properties may experience higher rates of lease default or terminations in the event of a downturn in the banking industry than they would if the tenant base were more diversified. This, in turn, could cause losses on the mortgage loans and on your investment in the certificates offered hereby.

 

Certain Risks of Student Housing Facilities. Certain of the mortgaged properties may be operated in whole or in part as student housing facilities. One (1) mortgaged property, securing a mortgage loan representing approximately 6.9% of the initial pool balance, are operated in whole or in part as a student housing facility. See APPENDIX I to this free writing prospectus. Student housing facilities may be more susceptible to damage or wear and tear than other types of multifamily housing. Such properties are also affected by their reliance on the financial well-being of the college or university to which such housing relates, competition from on-campus housing units

 

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(which may adversely affect occupancy), and the physical layout of the housing (which may not be readily convertible to traditional multifamily use).

 

Certain Risks of Health Club, Fitness Center or Exercise Studio Space Tenants. Certain of the mortgaged properties may include tenants that operate as health clubs, fitness centers or exercise studios. One (1) mortgaged property, securing a mortgage loan representing approximately 2.0% of the initial pool balance, has a health club, fitness center or exercise studio that is among the five (5) largest tenants at the related mortgaged property. See APPENDIX I to this free writing prospectus. Several factors may adversely affect the value and successful operation of a health club, fitness center 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;

 

·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, fitness centers 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, fitness center or exercise studio consequently may be less than would be the case if the property were readily adaptable to changing consumer preferences for other uses.

 

Tenant Concentration Increases the Risk That Cash Flow Will Be Interrupted Which Could Reduce Payments on Your Certificates

 

A deterioration in the financial condition of a tenant can be particularly significant if a mortgaged property is leased to a single or large tenant or a small number of tenants, because rent payable by such tenants generally will represent all or a significant portion of the cash flow available to the borrower to pay its obligations to the lender. In addition, more time may be required to re-lease a larger tenant’s space, and substantial capital costs may be incurred to make the space appropriate for replacement tenants. We cannot provide assurances that any major tenant will continue to perform its obligations under its lease or that if it fails to perform, a replacement tenant could be readily found.

 

Such risks are particularly significant with respect to retail properties, in which case fluctuations in the financial performance of an anchor, shadow anchor or large tenant may significantly impact the financial performance of the related property. Such fluctuations may have a particularly impact the financial performance of smaller tenants and may trigger cotenancy provisions in such tenants’ leases that reduce the amount of rent payable or permit such tenants to terminate their leases. We note that several large retail companies have recently announced store closures in response to decreased consumer demand and increased competitive pressures. For example, (i) on March 29, 2012, Best Buy announced its plan to close 50 of its U.S. stores in 2013 and cut $800 million in costs by 2015, (ii) on June 15, 2015, The Gap announced its plan to close 175 stores in North America, with approximately 140 of the closures occurring before January 31, 2016 and (iii) in connection with its July 2015 completion of its acquisition of Family Dollar, Dollar Tree Inc. will be required to sell 330 stores in the next 150 days. One or more of such companies may be an anchor, shadow anchor or large tenant at, or with respect to, certain mortgaged properties. For example:

 

·In the case of the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as The Mall of New Hampshire, representing approximately 6.6% of the initial pool balance, (i) the related mortgaged property is anchored by Sears and J.C. Penney, (ii) Best Buy is the

 

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largest tenant at the mortgaged property and (iii) The Gap is the fourth largest tenant at the mortgaged property and Old Navy, which is owned by The Gap, is the second largest tenant at the mortgaged property.

 

·In the case of the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Antioch Crossings Shopping Center, representing approximately 2.3% of the initial pool balance, Dollar Tree is the third largest tenant at the mortgaged property.

 

·In the case of the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as Southeast Retail Portfolio, representing approximately 1.9% of the initial pool balance, Family Dollar is the sole tenant at the mortgaged property known as Slidell Properties.

 

·In the case of the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Lockport Square, representing approximately 0.6% of the initial pool balance, Dollar Tree is the largest tenant at the mortgaged property.

 

We cannot assure you that any store not listed in a store closure plan will remain open for business or that, in light of increased competitive pressures in the retail industry, any retail anchor, large anchor or large tenant will continue to operate in its leased space. See “—A Significant Concentration of Retail Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Retail Properties—Competition May Adversely Affect the Performance of the Mortgaged Property” herein.

 

Ten (10) of the mortgaged properties, representing approximately 16.1% of the initial pool balance by allocated loan amount, are entirely, or almost entirely, leased to a single tenant. In addition, some of the tenants at the mortgaged properties (including sole tenants or other significant concentrations of tenants) have lease termination option dates or lease expiration dates that are prior to or shortly after the related maturity date or anticipated repayment date, and such expirations or terminations may not have been addressed by escrow requirements or other mitigating provisions. See APPENDIX I to this free writing prospectus for the lease expiration dates for each of the five (5) largest tenants by square footage with respect to each retail, office, industrial and mixed use mortgaged property.

 

Even if none of the top five (5) tenants at a particular mortgaged property have leases that expire before the maturity of the related mortgage loan, there may be a significant percentage of leases at a particular mortgaged property that expire in a single calendar year, a rolling 12-month period or prior to the maturity of a mortgage loan. Five (5) of the fifteen (15) largest mortgage loans or groups of cross collateralized mortgage loans, representing approximately 26.1% of the initial pool balance, are secured, in whole or in part, by retail, office, industrial and/or mixed use mortgaged properties at which more than 50% of the leases by net rentable area expire during the term of the related mortgage loan. We cannot assure you that such leases will be renewed or, even if renewed, will be renewed at the same rate.

 

In some cases the sole tenant or major tenant related to the borrower is physically occupying space related to its business; in other cases, the borrower tenant is a tenant under a master lease with the borrower, under which the affiliated tenant is obligated to make rent payments but does not physically occupy the related space at the mortgaged property. With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street, representing approximately 5.5% of the initial pool balance, the largest tenant at the related mortgaged property, Jordache, Inc., which occupies approximately 73.2% of the net rentable area, is affiliated with the borrower. See “Description of the Mortgage Pool—Additional Mortgage Loan Information” for a description of “master leases.” There can be no assurance the space “leased” by this borrower affiliate will eventually be occupied by third party tenants.

 

In addition to tenant concentration, another factor that you should consider is that retail, industrial and office properties also may be adversely affected if there is a concentration of tenants in the same or similar business or industry. In these cases, an issue with a particular tenant could have a disproportionately large impact on the mortgage pool and adversely affect distributions to certificateholders. Similarly, an issue with respect to a particular industry or entity could also have a disproportionately large impact on the mortgage pool.

 

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Please see APPENDIX III to this free writing prospectus for more information on any of the mortgaged properties related to the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool.

 

The Related Borrowers May Have Difficulty Re-Leasing Mortgaged Properties

 

Repayment of mortgage loans secured by retail, office and industrial properties will be affected by the expiration of leases and the ability of the related borrowers and property managers to renew the leases or to relet the space on comparable terms. In addition, certain properties may have tenants that are paying rent but are not in occupancy or may have vacant space that is not leased. Any “dark” space may cause the property to be less desirable to other potential tenants or the related tenant may be more likely to default in its obligations under the lease. We cannot assure you that those tenants will continue to fulfill their lease obligations or that the space will be relet.

 

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 related mortgaged properties. Certain mortgage loans require reserves for tenant improvements and leasing commissions, which may serve to defray some of, but not necessarily all of, those costs.

 

If a mortgaged property has multiple tenants, re-leasing costs and costs of enforcing remedies against defaulting tenants may be more frequent than in the case of mortgaged properties with fewer tenants, thereby reducing the cash flow available for debt service payments. These costs may cause a borrower to default in its obligations to a lender. Multi-tenanted mortgaged properties also may experience higher continuing vacancy rates and greater volatility in rental income and expenses.

 

A Concentration of Mortgage Loans in the Mortgage Pool Increases the Sensitivity to Loss Which Could Reduce Payments on Your Certificates

 

The three (3) largest mortgage loans or groups of cross-collateralized mortgage loans represent approximately 9.6%, 9.2% and 9.2%, respectively, of the initial pool balance. The ten (10) largest mortgage loans or groups of cross-collateralized mortgage loans in the aggregate represent approximately 64.8% of the initial pool balance. Each of the other mortgage loans in the mortgage pool represents no more than approximately 2.9% of the initial pool balance. See APPENDIX III to this free writing prospectus for more information on the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans.

 

A Concentration of Mortgage Loans with the Same or Related Borrowers Increases the Possibility of Loss on Those Mortgage Loans Which Could Reduce Payments on Your Certificates

 

Two (2) groups of mortgage loans, representing approximately 3.0% and 0.9% respectively, of the initial pool balance, were made to the same borrower or to borrowers that are affiliated with one another through partial or complete direct or indirect common ownership and, in general, have related mortgaged properties that are commonly managed. None of the mortgage loans are cross-collateralized and cross-defaulted.

 

Mortgage loans with the same borrower or related borrowers pose additional risks. Among other things:

 

·financial difficulty at one mortgaged property could cause the owner to defer maintenance at another mortgaged property in order to satisfy current expenses with respect to the troubled mortgaged property;

 

·the quality and experience of the persons or entities who control the borrower as operators of commercial real estate may affect all related mortgaged properties;

 

·the owner could attempt to avert foreclosure on one mortgaged property 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; and

 

·the bankruptcy or insolvency of any such borrower or respective affiliate could have an adverse effect on the operation of all of the related mortgaged properties and on the ability of such related mortgaged properties to produce sufficient cash flow to make required payments on the related mortgage loans.

 

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For more information regarding risks associated with cross-collateralization arrangements, see “Risk Factors—Certain Factors Affecting Delinquency, Foreclosure and Loss of the Mortgage Loans—Cross-Collateralization Provisions May Have Limitations on Their Enforceability” in the prospectus attached hereto as Exhibit A.

 

A Concentration of Mortgaged Properties in a Limited Number of Locations May Adversely Affect Payments on Your Certificates

 

Concentrations of mortgaged properties in geographic areas may increase the risk that adverse economic or other developments or a natural disaster or act of terrorism affecting a particular region of the country could increase the frequency and severity of losses on mortgage loans secured by those properties. In the past, several regions of the United States have experienced significant real estate downturns at times when other regions have not. Regional economic declines or adverse conditions in regional real estate markets could adversely affect the income from, and market value of, the mortgaged properties located in the region. Other regional factors—e.g., earthquakes, floods or hurricanes or changes in governmental rules or fiscal policies—also may adversely affect those mortgaged properties.

 

The mortgaged properties are located in nineteen (19) different states. Approximately 25.2%, 16.6%, 13.9%, 9.6%, 6.6% and 5.5% of the mortgaged properties, by allocated loan amount, are located in California, Texas, New York, Massachusetts, New Hampshire and New Jersey, respectively; concentrations of mortgaged properties in other states do not exceed 4.3% of the initial pool balance. Approximately 25.2%, 16.6%, 2.8% and 0.4% of the mortgaged properties by allocated loan amount are located in California, Texas, Florida and Louisiana, respectively, and may be more susceptible to special hazards that may not be adequately covered by insurance (such as earthquakes, flooding and hurricanes). The mortgage loans generally do not require any borrowers to maintain earthquake insurance. Mortgaged properties located in coastal areas, including, but not limited to Texas, Florida, and Louisiana, also may be more generally susceptible to hurricanes. Over the past several years, hurricanes in the Gulf Coast region of the United States have resulted in severe property damage as a result of the high winds and associated flooding. The mortgage loans do not all require flood insurance unless the related mortgaged properties are in a flood zone and flood insurance is available. We cannot assure you that any hurricane damage would be covered by insurance. 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. We cannot assure you that the economies in such impacted areas would recover sufficiently to support income-producing real estate at pre-event levels or that the costs of the related clean-up would not have a material adverse effect on the local or national economy. If a borrower does not have insurance against such risks and a severe casualty occurs at a mortgaged property, the borrower may be unable to generate income from the mortgaged property in order to make payments on the related mortgage loan.

 

Some of the 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 regards, would be considered secondary or tertiary markets.

 

A Concentration of Mortgage Loans with the Same Property Types Increases the Possibility of Loss on Those Mortgage Loans Which Could Reduce Payments on Your Certificates

 

A concentration of mortgage loans secured by the same property type can increase the risk that a decline in a particular industry will have a disproportionately large impact on the pool of mortgage loans. The following property types represent the indicated percentage of the initial pool balance by allocated loan amount:

 

·office properties represent approximately 25.2%

 

·retail properties represent approximately 20.0%;

 

·multifamily properties represent approximately 19.4%;

 

·hospitality properties represent approximately 17.2%;

 

·industrial properties represent approximately 9.3%;

 

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·self storage properties represent approximately 5.1%;

 

·mixed use properties represent approximately 2.0%; and

 

·manufactured housing community properties represent approximately 1.7%.

 

See “Risk Factors—Particular Property Types Present Special Risks” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Office Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Office Properties

 

Four (4) of the mortgaged properties, representing approximately 25.2% of the initial pool balance by allocated loan amount, are office properties. A large number of factors may affect the value of these office properties, including:

 

·the quality of an office building’s tenants;

 

·the diversity of an office building’s tenants, reliance on a single or dominant tenant or tenants in a volatile industry (e.g., technology and internet companies that have experienced or may in the future experience circumstances that make their businesses volatile);

 

·adverse changes in population, employment growth and patterns of telecommuting and sharing office spaces;

 

·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, such as sophisticated building systems);

 

·the availability of parking;

 

·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

 

·the suitability of a space for re-leasing without significant build-out costs.

 

Moreover, the cost of refitting office space for a new tenant is often higher than the cost of refitting other types of property.

 

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.

 

See “—Tenant Concentration Increases the Risk That Cash Flow Will Be Interrupted Which Could Reduce Payments on Your Certificates” above. See also “Risk Factors—Particular Property Types Present Special Risks—Office Properties” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Retail Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Retail Properties

 

Twenty-two (22) of the mortgaged properties, representing approximately 20.0% of the initial pool balance by allocated loan amount, are retail properties. Certain other mortgaged properties, although not characterized as retail properties in this free writing prospectus, may have a retail component. The quality and success of a retail property’s tenants significantly affect the property’s value. The success of retail properties can be adversely affected by local competitive conditions and changes in consumer spending patterns. A borrower’s ability to make debt

 

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service payments can be adversely affected if rents are based on a percentage of the tenant’s sales and sales decline or if the closure of one store gives rise to lease provisions permitting the closure of another store. Additional factors that can affect the success of a retail property include rights that certain tenants may have to terminate their leases, the location of the subject property and the physical condition and amenities of the subject property in relation to competing buildings.

 

See also “Risk Factors—Particular Property Types Present Special Risks—Retail Properties” in the prospectus attached hereto as Exhibit A.

 

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” located on the related property is usually proportionately larger in size than most other tenants in the property and is vital in attracting customers to a retail property. Fifteen (15) of the mortgaged properties, representing approximately 15.6% of the initial pool balance by allocated loan amount, are properties considered by the applicable mortgage loan seller to be leased in whole or in part to or are occupied by anchor tenants.

 

Many of the retail properties securing one or more mortgage loans also have shadow anchor tenants. A “shadow anchor tenant” is usually proportionally larger in size than most tenants in the property, is important in attracting customers to a retail property and is located sufficiently close and convenient to the property so as to influence and attract potential customers, but is not located 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).

 

Several mortgaged properties securing mortgage loans in the mortgage pool have anchor tenants whose leases expire during the term of the related mortgage loan. See APPENDIX I to this free writing prospectus. Furthermore, there may be retail properties with anchors (which may or may not be tenants) that are permitted to cease operating at any time because their leases or other operative agreements do not impose an obligation to remain open for business, or because such obligations have expired.

 

There may be retail properties with anchors (which may or may not be tenants) that are permitted to cease operating at any time if certain other stores are not operated at those locations. Furthermore, there may be non-anchor tenants that are permitted to offset all or a portion of their rent, pay rent based solely on a percentage of their sales or to terminate their leases if certain anchors and/or major tenants are either not operated or fail to meet certain business objectives. See also “—Tenant Concentration Increases the Risk That Cash Flow Will Be Interrupted Which Could Reduce Payments on Your Certificates,” “—The Related Borrowers May Have Difficulty Re-Leasing Mortgaged Properties” and “—Risks of Lease Early Termination Options” in this free writing prospectus.

 

Competition May Adversely Affect the Performance of the Mortgaged Property. 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 dollars: factory outlet centers, discount shopping centers and clubs, catalogue retailers, home shopping networks, internet websites and telemarketing. Continued growth of these alternative retail outlets, which often have lower operating costs, could adversely affect the rents collectible at the

 

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retail properties securing mortgage loans included in the mortgage pool, as well as the income from, and market value of, the mortgaged properties. Moreover, competing retail properties may be located or built in the areas where the retail properties are located, which could adversely affect the rents collectible at the retail properties securing mortgage loans included in the mortgage pool, as well as the income from, and market value of, the mortgaged properties.

 

A Significant Concentration of Multifamily Properties In The Mortgage Pool Will Subject Your Investment To The Special Risks Of Multifamily Properties

 

Ten (10) of the mortgaged properties, representing approximately 19.4% of the initial pool balance by allocated loan amount, are multifamily properties. 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, such as its age, condition, design, appearance, access to transportation and construction quality;

 

·the quality of property management;

 

·the location of the property;

 

·distance from employment centers and shopping areas;

 

·the ability of management to provide adequate maintenance and insurance;

 

·the types of services and amenities provided at the property;

 

·the property’s reputation;

 

·the level of mortgage interest rates and favorable income and economic conditions (which may encourage tenants to purchase rather than rent housing);

 

·rent concessions and month-to-month leases, which may impact cash flow at the property;

 

·the presence of competing properties;

 

·adverse local or national economic conditions which may limit the rent that may be charged and which may result in increased vacancies;

 

·the tenant mix (such as tenants being predominantly students or military personnel or employees of a particular business or industry) and requirements that tenants meet certain criteria (such as age restrictions for senior housing);

 

·in the case of any 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;

 

·state and local regulations (which may limit the ability to increase rents);

 

·government assistance/rent subsidy programs (which may influence tenant mobility); and

 

·national, state or local politics.

 

State Regulation and Rent Control Ordinances May Affect a Borrower’s Ability to Repay its Multifamily Mortgage Loan. In addition to state regulation of the landlord tenant relationship, certain counties and

 

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municipalities impose rent control on apartment buildings. These ordinances may restrict the borrower’s ability to charge market rent and 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. Any limitations on a borrower’s ability to set or raise property rents may impair such borrower’s ability to repay its multifamily loan from its net operating income or the proceeds of a sale or refinancing of the related multifamily property.

 

Limitations and Restrictions Imposed by Affordable Housing Covenants, Federal Housing Subsidies, Rent Stabilization Programs or Similar Programs May Result in Losses on Mortgage Loans. Certain of the mortgage loans are secured or may be secured in the future by mortgaged properties that are subject to certain affordable housing covenants and other covenants and restrictions with respect to various tax credit, city, state and federal housing subsidies, rent stabilization or similar programs, in respect of various units within the mortgaged properties. The limitations and restrictions imposed by these programs could result in losses on the mortgage loans. In addition, in the event that the program is cancelled, it could result in less income for the project. In certain cases, housing assistance program contracts may not be assigned to the related borrower or purchaser of the property until after the origination date of the mortgage loan. We cannot assure you that these contracts will ultimately be assigned. These programs may include, among others:

 

·rent limitations that would adversely affect the ability of borrower to increase rents to maintain the condition of their mortgaged properties and satisfy operating expenses;

 

·covenants that require a minimum number or percentage of units be rented to tenants who have incomes that are substantially lower than median incomes in the applicable area or region; and

 

·tenant income restrictions that may reduce the number of eligible tenants in those mortgaged properties and result in a reduction in occupancy rates.

 

The difference in rents between subsidized or supported properties and other multifamily rental properties in the same area may not be a sufficient economic incentive for some eligible tenants to reside at a subsidized or supported property that may have fewer amenities or be less attractive as a residence. As a result, occupancy levels at a subsidized or supported property may decline, which may adversely affect the value and successful operation of such property.

 

In addition, multifamily rental properties are part of a market that, in general, is characterized by low barriers to entry. Thus, a particular multifamily rental property market with historically low vacancies could experience substantial new construction and a resultant oversupply of rental units within a relatively short period of time. Because leases with respect to a multifamily rental property are typically leased on a short-term basis, the tenants residing at a particular property may easily move to alternative multifamily rental properties with more desirable amenities or locations or to single family housing.

 

Government Subsidies and Federal Statutes May Affect a Borrower’s Ability to Repay its Multifamily Mortgage Loan. Some of the mortgaged properties may have tenants that rely on rent subsidies under various government funded programs, including the Section 8 Tenant-Based Assistance Rental Certificate Program of the United States Department of Housing and Urban Development. With respect to certain of the mortgage loans, the borrower may receive subsidies or other assistance from government programs. The related mortgage loan seller may have underwritten the related mortgage loan on the assumption that such assistance will continue. Loss of any applicable assistance could have an adverse effect on the ability of the related borrower to make timely payments of debt service. In addition, the restrictions described above relating to the use of the related mortgaged property could reduce the market value of the related mortgaged property.

 

Generally, the mortgaged property must satisfy certain requirements, the borrower must observe certain leasing practices and/or the tenant(s) must regularly meet certain income requirements or the mortgaged property must have certain other characteristics consistent with government policy related to the applicable program. There is no assurance that such programs will be continued in their present form, that the borrower will continue to comply with the requirements of the programs to enable the borrower to receive the subsidies in the future, that the investors in such borrower will continue to receive the related tax benefit or that the level of assistance provided will be

 

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sufficient to generate enough revenues for the related borrower to meet its obligations under the related mortgage loans.

 

In addition, under the Federal Fair Housing Act, analogous statutes in some states and regulations and guidelines issued pursuant to those laws, any and all otherwise-available units in a multifamily apartment building must be made available to any disabled person who meets the financial criteria generally applied by the landlord, including implementing alterations and accommodations in certain circumstances. The costs of this compliance may be high and the penalties for noncompliance may be severe. Thus, these fair housing statutes, regulations and guidelines present a risk of increased operating costs to the borrowers under the pooled mortgage loans secured by multifamily apartment buildings, which may reduce (perhaps significantly) amounts available for payment on the related mortgage loan.

 

See also “Risk Factors—Particular Property Types Present Special Risks—Multifamily Properties” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Hospitality Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Hospitality Properties

 

Four (4) of the mortgaged properties, representing approximately 17.2% of the initial pool balance by allocated loan amount, are hospitality properties. Various factors may adversely affect the economic performance of a hospitality property, including:

 

·location of property and proximity to transportation, major population centers or attractions;

 

·adverse economic and social conditions, either local, regional, national or international which may limit the amount that can be charged for a room, reduce occupancy levels and reduce the demand for conference and other venue space at the related property;

 

·the presence or construction of competing hotels or resorts;

 

·continuing expenditures for modernizing, refurbishing, and maintaining existing facilities prior to the expiration of their anticipated useful lives;

 

·franchise affiliation (or lack thereof);

 

·limited service hospitality properties have lower barriers to entry than other types of hospitality properties, and over-building could occur;

 

·a deterioration in the financial strength or managerial capabilities of the owner and/or operator of a hotel;

 

·changes in travel patterns, terrorist attacks, increases in energy prices, strikes, natural disasters, bad weather, relocation of highways or the construction of additional highways;

 

·management ability of property managers and/or whether management contracts or franchise agreements are renewed or extended upon expiration;

 

·suitability for a particular occupant or category of occupants;

 

·building design and adaptability; and

 

·relative illiquidity of hotel 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 hotels tends to be affected by adverse economic conditions, natural disasters and competition more quickly than are other types of commercial properties.

 

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Moreover, the hotel and lodging industry is generally seasonal in nature. This seasonality can be expected to cause periodic fluctuations in a hotel property’s revenues, occupancy levels, room rates and operating expenses.

 

A hotel’s ability to attract customers and/or a portion of its revenues may depend on its having a liquor license. The laws and regulations relating to liquor licenses generally prohibit the transfer of those liquor licenses to any other person. In the event of a foreclosure of a hotel property with a liquor license, the special servicer on behalf of the issuing entity or a purchaser in a foreclosure sale would likely have to apply for a new license. There can be no assurance that a new liquor license could be obtained promptly or at all. The lack of a liquor license in a full service hotel could have an adverse impact on the revenue generated by the hotel.

 

The availability of competing hospitality properties may also have an effect on the financial performance of such mortgaged properties, and consequently, on the related borrower’s ability to repay its mortgage loan. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, for example:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Westin Hotel at the Domain, representing approximately 9.2% of the initial pool balance, in addition to the existing Aloft Hotel Austin at the Domain hotels located near the related mortgaged property, one new hotel recently opened and a second hotel is under development.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Holiday Inn JFK, representing approximately 4.6% of the initial pool balance, the related mortgaged property is located on the east side of JFK Airport, removed from the airport hotel cluster, is not located proximate to a subway station, and is only served by Queens local buses.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as DoubleTree McAllen, representing approximately 2.2% of the initial pool balance, two hotels totaling 269 rooms that are considered to be competitive with the related mortgaged property are under construction or in the early development stage. In addition, several limited-service hotels, including La Quinta and Hawthorn Suites, are under development in the area.

 

The Performance of a Hospitality Property Depends in Part on the Performance of its Franchisor or Management Company. A hotel property securing a mortgage loan may be affiliated with a franchise company through a franchise agreement or a hotel management company through a management agreement. The performance of a hotel property affiliated with a franchise or 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.

 

The continuation of a franchise agreement or management agreement is subject to specified operating standards and other terms and conditions set forth in such agreements. The failure of a borrower to maintain such standards or adhere to other applicable terms and conditions could result in the loss or cancellation of their rights under the franchise or hotel management agreement.

 

Certain franchise agreements or management agreements may expire or grant the franchisor a termination right that is exercisable during the term of the related mortgage loan or soon thereafter, and there can be no assurance that they can be renewed. For example, with respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Holiday Inn JFK, representing approximately 4.6% of the initial pool balance, the related franchise agreement expires during the term of the mortgage loan. With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Holiday Inn JFK, representing approximately 4.6% of the initial pool balance, the related franchise agreement expires on November 26, 2023, prior to the loan maturity date of August 6, 2025.

 

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In addition, certain franchise agreements may not be automatically assignable to subsequent holders of the mortgage loan, and there can be no assurance that a future assignment of the franchise agreement will be approved by the franchisor. Further, replacement franchises and/or hotel managers may require significantly higher fees as well as the investment of capital to bring the hotel into compliance with the requirements of the replacement franchisor and/or hotel managers.

 

Any provision in a franchise agreement or management agreement providing for termination because of the bankruptcy of a franchisor or manager generally will not be enforceable. The transferability of franchise license agreements is restricted. In the event of a foreclosure, the lender or its agent would not have the right to use the franchise license without the franchisor’s consent.

 

In some cases where a hospitality property is subject to a license or franchise agreement, the licensor or franchisor has required the completion of various repairs and/or renovations pursuant to a property improvement plan issued by the franchisor. Failure to complete those repairs and/or renovations in accordance with the plan could result in the hospitality property’s losing its license or franchise. In these circumstances, the terms of the related mortgage loan will often require the establishment of reserves in connection with any of those repairs and/or renovations. However, we cannot assure you that any amounts reserved will be sufficient to complete the repairs and/or renovations required with respect to any affected hospitality property. In addition, in some cases, those reserves will be maintained by the franchisor or property manager. Furthermore, the lender may not require a reserve for repairs and/or renovations in all instances. In addition, the related borrower with respect to such mortgaged property has the right to replace the existing license agreement with an alternative license or franchise agreement.

 

In addition, in certain cases, mortgaged properties may not be, or in the future may no longer be, affiliated with a franchise under a franchise agreement. The lack of a nationally recognized franchise may impact occupancy and revenue as the related mortgaged property does not have the benefit of a nationally linked reservation system or the marketing benefits which come from association with a nationally recognized franchisor.

 

See also “Risk Factors—Particular Property Types Present Special Risks—Hotel Properties” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Industrial Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Industrial Properties

 

Three (3) of the mortgaged properties, representing approximately 9.3% of the initial pool balance by allocated loan amount, is an industrial property. Various factors may adversely affect the economic performance of this industrial property, which could adversely affect payments on your certificates, including:

 

·quality of tenant;

 

·reduced demand for industrial space because of a decline in a particular industry segment;

 

·increased supply of competing industrial space because of relative ease in constructing buildings of this type;

 

·a property becoming functionally obsolete;

 

·insufficient supply of labor to meet demand;

 

·changes in access to the property, energy prices, strikes, relocation of highways or the construction of additional highways;

 

·location of the property in relation to access to transportation;

 

·suitability for a particular tenant;

 

·building design and adaptability;

 

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·expense to convert a previously adapted space to another use;

 

·a change in the proximity of supply sources; and

 

·environmental hazards.

 

Concerns about the quality of tenants, particularly major tenants, are similar in both office properties and industrial properties, although industrial properties may be more frequently 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 in which the related tenant(s) conduct their businesses (for example, a decline in consumer demand for products sold by a tenant using the property as a distribution center). In addition, a particular industrial or warehouse property that suited the needs of its original tenant may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties. 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. Also, mortgaged properties used for many industrial purposes are more prone to environmental concerns than other property types.

 

Aspects of building site design and adaptability affect the value of an industrial property. Site characteristics that are generally desirable to a warehouse/industrial property include high clear ceiling heights, wide column spacing, a large number of bays (loading docks) and large bay depths, divisibility, a layout that can accommodate large truck minimum turning radii and overall functionality and accessibility.

 

In addition, because of unique construction requirements of many industrial properties, any vacant industrial property space may not be easily converted to other uses. Thus, if the operation of any of the industrial 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 industrial property may be substantially less, relative to the amount owing on the related mortgage loan, than would be the case if the industrial property were readily adaptable to other uses.

 

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.

 

See also “Risk Factors—Particular Property Types Present Special Risks—Industrial and Warehouse Properties” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Self Storage Facilities in the Mortgage Pool Will Subject Your Investment to the Special Risks of Self Storage Facilities

 

Eleven (11) of the mortgaged properties, representing approximately 5.1% of the initial pool balance by allocated loan amount, are self storage properties. Self storage facilities are considered vulnerable to competition, because both acquisition and development costs and break-even occupancy are relatively low. The conversion of self storage facilities to alternative uses would generally require substantial capital expenditures. Thus, if the operation of any of the self storage mortgaged properties becomes unprofitable due to:

 

·decreased demand;

 

·competition;

 

·lack of proximity to apartment complexes or commercial users;

 

·apartment tenants moving to single-family homes;

 

·decline in services rendered, including security;

 

·dependence on business activity ancillary to renting units;

 

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·security concerns;

 

·age of improvements; or

 

·other factors;

 

so that the borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that self storage mortgaged property may be substantially less, relative to the amount owing on the mortgage loan, than if the self storage mortgaged property were readily adaptable to other uses.

 

Tenant privacy, anonymity and efficient and/or unsupervised access may heighten environmental risks (although lease agreements generally prohibit users from storing hazardous substance in the units). No environmental assessment of a mortgaged property included an inspection of the contents of the self storage units included in the self storage mortgaged properties and there is no assurance that all of the units included in the self storage mortgaged properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future.

 

See also “Risk Factors—Particular Property Types Present Special Risks—Self-Storage Properties” in the prospectus attached hereto as Exhibit A.

 

A Significant Concentration of Mixed Use Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Mixed Use Properties

 

One (1) mortgaged property, representing approximately 2.0% of the initial pool balance by allocated loan amount, is a mixed use property. Such mixed use mortgaged property consists of office and retail and other components and as such, the mortgage loan secured by such mixed use mortgaged property will share risks associated with such underlying components. In addition, a mixed use property may be managed by a manager that is not experienced in managing all of the property types comprising the mortgaged property. See “—The Operation of Commercial Properties Is Dependent Upon Successful Management” in this free writing prospectus.

 

A Significant Concentration of Manufactured Housing Community Properties in the Mortgage Pool Will Subject Your Investment to the Special Risks of Manufactured Housing Community Properties

 

Two (2) of the mortgaged properties, representing approximately 1.7% of the initial pool balance by allocated loan amount, are manufactured housing community properties. 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 community 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 community property;

 

·the ability of management to provide adequate maintenance and insurance;

 

·the type of services or amenities it provides;

 

·the property’s reputation;

 

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·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 may 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 such manufactured housing community properties becomes unprofitable due to competition, age of the improvements or other factors such that the related borrower becomes unable to meet its obligations on the related mortgage loan, the liquidation value of that manufactured housing community 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.

 

Leased Fee Properties Entail Risks that May Adversely Affect Payments on Your Certificates

 

With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Antioch Crossings Shopping Center, representing approximately 2.3% of the initial pool balance, 5,641 square feet (of the 126,308 total square feet (which is fee simple)) of the mortgaged property 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 collateral for the mortgage loan included in the issuing entity and is operated as a gas station.

 

Land subject to a ground lease (or air rights subject to an air rights lease) presents special risks. In such cases, where the borrower owns the fee interest but not the related improvements, such related borrower will only receive the rental income from the ground lease (or air rights lease) and not from the operation of any related improvements. Any default by the lessee would adversely affect the related borrower’s ability to make payments on the related mortgage loan. While ground leases (or air rights leases) may contain certain restrictions on the use and operation of the related mortgaged property, the 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 leasehold interest. However, the borrower has the same risk of interruptions in cash flow if such 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. The lessee is commonly permitted to mortgage its leasehold interest, and although the leasehold mortgage is generally subject and subordinate to the fee mortgage and the ground lease (or air rights lease), the leasehold lender will often have notice and cure rights with respect to material defaults under the lease. In addition, leased fee interests are less frequently purchased and sold than other interest in commercial real property. It may be difficult for the issuing entity, if it became a foreclosing lender, to sell the fee interest 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 lessee’s use of the premises because that use is a source of revenue for the payment of rent under the ground lease (or air rights lease).

 

Mortgaged Properties with Condominium Ownership Could Adversely Affect Payments on Your Certificates

 

One (1) of the mortgage loans, representing approximately 9.6% of the initial pool balance, is secured in whole or in part by the related borrower’s fee simple or leasehold interest in one or more condominium units (including, solely for purposes of the discussions herein relating to condominiums, planned unit developments). 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. The condominium interests described above in some cases may constitute less than a majority of such voting rights and/or may not entail an ability to prevent adverse changes in the governing organizational document for the condominium entity. 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

 

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a casualty. There can be no assurance that the borrower under a mortgage loan secured by one or more interests in that condominium will have any control over decisions made by the related condominium board. There can be no assurance that the related condominium board will always act in the best interests of the borrower under those mortgage loans. 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. If an owner of another unit fails to pay its allocated assessments, the related borrower may be required to pay those 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, the lien is generally extinguished if a mortgagee 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.

 

Due to the nature of condominiums and a borrower’s ownership interest therein, a default on a loan secured by the borrower’s interest in one or more condominium units may not allow the holder of the mortgage loan the same flexibility in realizing upon the underlying real property as is generally available with respect to properties that are not secured by condominiums. 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 delay, expense and risk than servicing and realizing upon collateral for other loans that are not secured by condominiums. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, the related mortgaged property consists of one condominium unit in a two-unit condominium structure. The borrower does not have control of the condominium board; instead, decisions are made by mutual agreement of the two condominium owners, with no one party having control.

 

For additional information related to the mortgaged properties primarily secured by the related borrower’s fee simple ownership interest in one or more condominium units, please see APPENDIX I to this free writing prospectus.

 

Leasehold Interests Entail Certain Risks Which May Adversely Affect Payments on Your Certificates

 

Three (3) mortgaged properties, representing approximately 3.1% of the initial pool balance by allocated loan amount, are each subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien solely on a leasehold estate in the entire related mortgaged property. In addition, one (1) mortgaged property, representing in the aggregate approximately 6.6% of the initial pool balance by allocated loan amount, is subject to a mortgage, deed of trust or similar security instrument that creates a first mortgage lien on a fee interest in a portion of the related mortgaged property and a leasehold interest in the remaining portion of the related mortgaged property.

 

Leasehold mortgage loans are subject to certain risks not associated with mortgage loans secured by a lien on the fee estate of the borrower. The most significant risk with respect to leasehold mortgage loans is that if the borrower’s leasehold were to be terminated upon a lease default, the lender would lose its security interest in the leasehold estate. Generally, each related ground lease requires the lessor to give the lender notice of the borrower’s defaults under the ground lease and an opportunity to cure them, permits the leasehold interest to be assigned to the lender or the purchaser at a foreclosure sale, in some cases only upon the consent of the lessor, and contains certain other protective provisions typically included in a “mortgageable” ground lease.

 

Certain of the mortgaged properties are also subject to various use restrictions imposed by a related ground lease, and these limitations 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.

 

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Ground leases securing the mortgaged properties may provide that the ground rent payable under the ground lease increases or otherwise varies during the term of the lease. Any such increases or rent variations may adversely affect the cash flow and net income of the borrower from the mortgaged property.

 

With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, representing approximately 2.7% of the initial pool balance, pursuant to a related redevelopment agreement, transfers that render all or any part of the related mortgaged property exempt from real property taxation are permitted only with the prior written consent of the Village of Greendale. However, pursuant to a related redevelopment agreement estoppel, the Village of Greendale confirmed that this particular section of the redevelopment agreement is inapplicable to the sale and leaseback of the related mortgaged property pursuant to the Bon-Ton lease.

 

Upon the bankruptcy of a lessor or a lessee under a ground lease (or, with respect to a leasehold interest that is a space lease or air rights lease, the space lease or air rights lease), the debtor entity has the right to assume or reject the lease. If a debtor lessor rejects the lease, the lessee has the right to treat such lease as terminated by rejection or to remain in possession of its leased premises for the rent otherwise payable under the lease for the term of the lease (including renewals). 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 pre-petition agreement to refuse to treat a ground lease (or space lease or air rights 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.

 

Tenancies in Common, Delaware Statutory Trusts and Indemnity Deeds of Trust May Hinder Recovery

 

Borrowers under two (2) mortgage loans, representing in the aggregate approximately 12.2% of the initial pool balance, own the related mortgaged properties as tenants-in-common. In general, with respect to a tenant-in-common ownership structure, each tenant-in-common owns an undivided interest in the property and if such tenant-in-common desires to sell its interest in the property (and is unable to find a buyer or otherwise needs to force a partition) the tenant-in-common has the ability to request that a court order a sale of the property and distribute the proceeds to each tenant-in-common proportionally.

 

The bankruptcy, dissolution or action for partition by one or more of the tenants-in-common could result in an early repayment of the related mortgage loan, a significant delay in recovery against the tenant-in-common borrowers, a material impairment in property management and a substantial decrease in the amount recoverable upon the related mortgage loan. Even if the related tenant-in-common borrower has waived its right to partition, which would reduce the risk of partition, there can be no assurance that, if challenged, any such waiver would be enforceable. The tenant-in-common structure may cause delays in the enforcement of remedies because each time a tenant-in-common borrower files for bankruptcy, the bankruptcy court stay will be reinstated. There can be no assurance that a bankruptcy proceeding by a single tenant-in-common borrower will not delay enforcement of this mortgage loan.

 

In certain instances where borrowers under mortgage loans use a Delaware statutory trust structure in order to gain certain tax free exchange treatment for property of like kind under section 1031 of the Code, these borrowers generally 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.

 

Certain of the mortgage loans may not expressly prohibit transfers of ownership interests in the related borrower to entities structured as tenants-in-common and/or Delaware statutory trusts,however, other conditions are typically required to be satisfied in connection with any such transfer, including, but not limited to one or more of the following: (i) that the lender receive rating agency confirmation in connection with such transfer; (ii) that the transferee be a special purpose entity; (iii) that the transferee be affiliated with the borrower; and/or (iv) that the lender or its counsel approve of the organizational documents of the transferee.

 

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State and Local Mortgage Recording Taxes May Apply Upon a Foreclosure or Deed in Lieu of Foreclosure and Reduce Net Proceeds

 

Many jurisdictions impose recording taxes on mortgages which, if not paid at the time of the recording of the mortgage, may impair the ability of the lender to foreclose the mortgage. Under certain circumstances, governmental authorities could assert that a mortgage could not be foreclosed without payment of the mortgage recording tax, and possibly interest and penalties as well. Such taxes, interest and penalties could be significant in amount and would, if imposed, reduce the net proceeds realized by the issuing entity in liquidating the real property securing the related mortgage loan.

 

A Tenant Bankruptcy May Adversely Affect the Income Produced by a Mortgaged Property and May Adversely Affect the Payments on Your Certificates

 

Certain of the tenants at some of the mortgaged properties may have been, may currently be, or may in the future become a party in a bankruptcy proceeding. The bankruptcy or insolvency of a major tenant, or a number of smaller tenants, in retail, industrial and office properties may adversely affect the income produced by the property.

 

In addition, any tenant may, from time to time, experience a downturn in its business, which may weaken its financial condition and result in a reduction 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 rent 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.

 

Section 365(e) of the bankruptcy code generally invalidates clauses that terminate contracts automatically upon the filing by one of the parties of a bankruptcy petition or that are conditioned on a party’s solvency, but the bankruptcy code allows the debtor to assume or reject or, subject to certain conditions, assume and assign to a third party, any unexpired lease in full (which, as a practical matter, may give the debtor leverage to seek amendments to the lease in order to avoid a rejection). If the tenant rejects the lease, the landlord’s claim for breach of the lease would (absent collateral securing the claim) be treated as a general unsecured claim against the tenant. The amount of the claim would be limited to the amount owed for unpaid rent under the lease for the periods prior to the bankruptcy petition, or earlier repossession or surrender of the lease premises, plus the rent under the lease for the greater of one year, or 15%, not to exceed three years, of the remaining term of such lease, and the actual amount of the recovery could be less than the amount of the claim. If a tenant assigns or assumes and assigns 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. We cannot assure you that tenants of the mortgaged properties will continue making payments under their leases or that tenants will not file for bankruptcy protection in the future or, if any tenants so file, that they will continue to make rental payments in the future or, if any tenants so file, that they will continue to make rental payments in a timely manner.

 

Under the Federal Deposit Insurance Act, upon the insolvency of certain banking institutions, the Federal Deposit Insurance Corporation would be appointed as receiver for such tenant and has the option to disaffirm any lease it determines to be burdensome if disaffirmance will permit the orderly administration of the failed bank. In such event, where a bank was the lessee, damages would be limited to contractual rent accruing before the later of the date (i) the notice of disaffirmance was mailed by the Federal Deposit Insurance Corporation or (ii) the disaffirmance becomes effective, unless the lessor is in breach of the lease. Upon such a disaffirmance, the landlord will also generally have a claim for unpaid rent due as the date of appointment of the receiver, subject to all defenses, and to the limitation on claims of the failed tenant’s creditors generally. To the extent the landlord’s claim for past rent is unsecured, such claim may be further limited by the depositor preference provisions of the Federal Deposit Insurance Act that could cause the bulk of the failed tenant’s assets to be paid to depositors and the Federal Deposit Insurance Corporation as the subrogee of any depositors paid by the Federal Deposit Insurance Corporation in its capacity as insurer.

 

See “Risk Factors—Tenant Bankruptcy Adversely Affects Property Performance” in the attached prospectus.

 

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Environmental Risks Relating to Specific Mortgaged Properties May Adversely Affect Payments on Your Certificates

 

The issuing entity could become liable for a material adverse environmental condition at an underlying mortgaged property. For example:

 

Any potential liability with respect to any such mortgaged property or any other mortgaged property could reduce or delay payments on the certificates.

 

100.0% of the mortgaged properties securing the mortgage loans have been subject to environmental site assessments, or in some cases an update of a previous assessment, in connection with the origination or securitization of the loans. In all cases, the environmental site assessment was a Phase I environmental assessment, although in some cases a Phase II site assessment was also performed.

 

If the foregoing environmental site assessments revealed any such circumstances or conditions with respect to the related mortgaged property, then generally, with certain exceptions, one or more of the following was the case:

 

·an escrow of funds exists reasonably estimated to be sufficient for purposes of effecting such remediation;

 

·if the only environmental condition relates to the presence of asbestos-containing materials, radon in indoor air, lead based paint or lead in drinking water, the environmental site assessment recommended only the implementation of an operations and maintenance program, which the related borrower is required to do;

 

·the identified environmental condition was remediated, abated or contained in all material respects and, if and as appropriate, a no further action, completion or closure letter was obtained from the applicable governmental regulatory authority (or such governmental authority listed the condition as “closed” or a reputable environmental consultant has concluded that no further action or investigation is required);

 

·the related mortgaged property is insured under a qualified policy of insurance against certain losses arising from such circumstances or conditions;

 

·a party not related to the related borrower with financial resources reasonably adequate to cure the subject violation in all material respects was identified as a responsible party for such circumstance or condition; or

 

·a party related to the related borrower with financial resources reasonably adequate to cure the subject violation in all material respects is required to take action.

 

Some borrowers under the mortgage loans may not have satisfied or may not satisfy all post-closing obligations required by the related mortgage loan documents with respect to environmental matters. There can be no assurance that recommended operations and maintenance plans have been implemented or will continue to be complied with.

 

Certain mortgaged properties have environmental insurance coverage. For example:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Rancho Carmel Plaza, representing approximately 1.3% of the initial pool balance, the related borrower obtained an environmental insurance policy issued by Steadfast Insurance Company, in the amount of $5,000,000 in the aggregate and per claim, with a ten (10)-year term (and a two (2) year tail) and a $50,000 deductible.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Rite Aid - Carlisle, representing approximately 0.4% of the initial pool balance, the related borrower obtained an environmental insurance policy issued by Lloyd’s, London in the amount of $2,000,000 in the aggregate and per claim, with a ten (10)-year term and a $50,000 deductible.

 

Some mortgage loans provide that the liability of the environmental indemnitors will terminate upon the satisfaction of certain conditions or as of a certain date.

 

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We cannot assure you,however, that the environmental assessments revealed or accurately quantified all existing or potential environmental risks or that all adverse environmental conditions have been completely abated or remediated or that any reserves, insurance or operations and maintenance plans will be sufficient to remediate the environmental conditions. Moreover, we cannot assure you that:

 

·future laws, ordinances or regulations will not impose any material environmental liability; or

 

·the current environmental condition of the mortgaged properties will not be adversely affected by tenants or by the condition of land or operations in the vicinity of the mortgaged properties (such as underground storage tanks).

 

Environmental Laws Entail Risks that May Adversely Affect Payments on Your Certificates. Under various United States federal, state, local and municipal environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or adjacent to the 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 asbestos-containing materials. In some states, contamination of a property may give rise to a lien on the property to assure payment of the costs of cleanup. In some states, this lien has priority over the lien of a pre-existing mortgage. Additionally, third parties may seek recovery from owners or operators of real properties for cleanup costs, property damage or personal injury associated with releases of, or other exposure to hazardous substances related to the properties.

 

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, or strong potential for contamination by, hazardous substances consequently can have a materially adverse effect on the owner’s ability to refinance the property or to sell the property to a third party, the value of the property and a borrower’s ability to repay its mortgage loan.

 

Certain Types of Operations Involved in the Use and Storage of Hazardous Materials May Lead to an Increased Risk of Issuing Entity Liability. Portions of some of the mortgaged properties securing the mortgage loans may include tenants that operate as, were previously operated as, or are located near other properties currently or previously operated as, on-site dry-cleaners or gasoline stations. Both types of operations involve the use and storage of hazardous materials, leading to an increased risk of liability to the tenant, the landowner and, under certain circumstances, a lender (such as the issuing entity) under environmental laws. These operations incur ongoing costs to comply with environmental permit or license requirements and other environmental laws governing, among other things, containment systems and underground storage tank systems. Any liability to borrowers under environmental laws, especially in connection with releases into the environment of gasoline, dry-cleaning solvents or other hazardous substances from underground storage tank systems or otherwise, could also adversely impact the related borrower’s ability to repay the related mortgage loan.

 

Problems Associated with Mold May Affect the Value of a Mortgaged Property and/or Lead to an Increased Risk of Issuing Entity Liability. Problems associated with mold may pose risks to real property and may also be the basis for personal injury claims against a borrower. Although, in general, the mortgaged properties are required to be inspected periodically, there is no set of generally accepted standards for the assessment of any existing mold. In addition, many of the insurance policies presently covering the mortgaged properties may specifically exclude losses due to mold. If left unchecked, problems associated with mold could result in the interruption of cash flow, remediation expenses and litigation which could adversely impact collections from a mortgaged property.

 

Environmental Assessments May Delay Recovery on a Mortgaged Property. Before the special servicer acquires title to a mortgaged property on behalf of the issuing entity or assumes operation of the property, it must obtain an environmental assessment of the property, or rely on a recent environmental assessment. This requirement will decrease the likelihood that the issuing entity will become liable under any environmental law. However, this requirement may effectively preclude foreclosure until a satisfactory environmental assessment is obtained, or until any required remedial action is thereafter taken. There is accordingly some risk that the mortgaged property will decline in value while this assessment is being obtained. Moreover, we cannot assure you that this requirement will

 

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effectively insulate the issuing entity from potential liability under environmental laws. Any such potential liability could reduce or delay payments to certificateholders.

 

You May Experience a Loss If a Borrower is Unable to Repay Its Loan on Its Maturity Date, and the Risk of Non-Payment is Greater for Balloon Loans; Longer Amortization Schedules and Interest-Only Provisions Create Risks

 

100.0% of the mortgage loans are balloon loans. For purposes of this free writing prospectus, we consider a mortgage loan to be a “balloon loan” if its principal balance is not scheduled to be fully or substantially amortized by the loan’s respective anticipated repayment date (in the case of a loan having an anticipated repayment date) or maturity date. One (1) of these balloon loans, representing approximately 9.6% of the initial pool balance, is a mortgage loan that has an anticipated repayment date and provides for an increase in the mortgage rate and/or principal amortization at a specified date prior to stated maturity (loans of such type are also referred to in this free writing prospectus as “ARD loans”). ARD loans are structured to encourage the borrower to repay the mortgage loan in full by the specified date upon which these increases occur (which is prior to the mortgage loan’s stated maturity date). Also included in the mortgage pool are eleven (11) mortgage loans, representing approximately 32.1% of the initial pool balance, that currently provide for monthly payments of interest only for their respective terms to maturity, and sixteen (16) mortgage loans, representing approximately 28.3% of the initial pool balance, that provide for monthly payments of interest only for a portion of their respective original terms ranging from twenty-four (24) months to eighty-four (84) months and then provide for the monthly payment of principal and interest over their respective remaining terms.

 

A longer amortization schedule or an interest-only provision in a mortgage loan will result in a higher amount of principal outstanding under the mortgage loan at any particular time, including at the maturity date or anticipated repayment date of the mortgage loan, than would have otherwise been the case had a shorter amortization schedule been used or had the mortgage loan had a shorter interest-only period or not included an interest-only provision at all. That higher principal amount outstanding could both (i) make it more difficult for the related borrower to make the required balloon or ARD payment at maturity or on the related anticipated repayment date and (ii) lead to increased losses for the trust either during the loan term or at maturity or such anticipated repayment date if the mortgage loan becomes a defaulted mortgage loan.

 

Mortgage loans with substantial remaining principal balances at their stated maturity date involve greater risk than fully amortizing mortgage loans. With respect to the mortgage loans secured by the mortgaged properties identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, 261 Fifth Avenue, The Mall of New Hampshire, WPC Department Store Portfolio and Aviare Place Apartments, representing approximately 9.6%, 9.2%, 6.6%, 2.7% and 0.7%, respectively, of the initial pool balance, such balloon risk is, in each such case, enhanced by the existence of apari passu companion loan (and, with respect to the Charles River Plaza North mortgage loan, a subordinate promissory note) that is also secured by the related mortgaged properties. In addition, fully amortizing mortgage loans that pay interest on an actual/360 basis but have fixed monthly payments may, in effect, have a small balloon payment due at maturity. We cannot assure you that each borrower will have the ability to repay the outstanding principal balance of the applicable mortgage loan on the pertinent date, especially under a scenario where interest rates are higher than when such mortgage loan was originated. A borrower’s ability to repay a mortgage loan on its anticipated repayment date or stated maturity 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. No mortgage loan seller or any of its respective affiliates is under any obligation to refinance any mortgage loan. Whether or not losses are ultimately sustained, any delay in the collection of a balloon payment on the maturity date will likely extend the weighted average life of your certificates.

 

In addition, in order to maximize recoveries on defaulted mortgage loans, the pooling and servicing agreement enables the special servicer (and, in certain cases, the master servicer subject to the consent of the special servicer) to extend and modify the terms of mortgage loans (other than any non-serviced mortgage loans, which are serviced pursuant to separate servicing agreements) that are in material default or as to which a payment default (including the failure to make a balloon payment) is reasonably foreseeable, subject,however, to the limitations described under “Servicing of the Mortgage Loans—Mortgage Loan Modifications” in this free writing prospectus. The master servicer or special servicer is only required to determine that any such extension or modification is reasonably likely to produce a greater recovery than a liquidation of the real property securing such mortgage loan.

 

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There is a risk that the decision of the master servicer or special servicer to extend or modify a mortgage loan may not in fact produce a greater recovery on your certificate. There can be no assurance that any extension or modification will increase the present value of recoveries in a given case. Neither the master servicer nor the special servicer will have the ability to extend or modify any non-serviced mortgage loan because any such mortgage loan will be serviced pursuant to, and by another master servicer and special servicer under, a separate servicing agreement. Any delay in the collection of a balloon payment that would otherwise be distributable in respect of a class of certificates offered in this free writing prospectus, whether such delay is due to borrower default or to modification of the related mortgage loan by the applicable master servicer or special servicer, will likely extend the weighted average life of such class of certificates.

 

See “—The Repayment of a Commercial Mortgage Loan Is Dependent on the Cash Flow Produced by the Property Which Can Be Volatile and Insufficient to Allow Timely Payment on Your Certificates” and “Risk Factors—Risks Related to Market Conditions—The Volatile Economy and Credit Crisis May Increase Loan Defaults and Affect the Value and Liquidity of Your Investment” above and “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans” in this free writing prospectus.

 

A Borrower’s Other Loans May Reduce the Cash Flow Available to the Mortgaged Property Which May Adversely Affect Payments on Your Certificates

 

The mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, securing a mortgage loan representing approximately 9.6% of the initial pool balance, also secures non-serviced companion loans with an aggregate principal balance as of the cut-off date of $137,780,764 and a subordinate B note with a principal balance as of the cut-off date of $33,945,985. Such non-serviced companion loan ispari passu in right of payment with the related mortgage loan, and such non-serviced companion loan and the related mortgage loan are generally senior in right of payment to the related B note.

 

The mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, securing a mortgage loan representing approximately 9.2% of the initial pool balance, also secures a related companion loan, which related companion loan has an outstanding principal balance as of the cut-off date of $110,000,000. Such companion loan ispari passu in right of payment with the related mortgage loan.

 

The portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as The Mall of New Hampshire, securing a mortgage loan representing approximately 6.6% of the initial pool balance, also secures a non-serviced companion loan with a principal balance as of the cut-off date of $100,000,000. Such non-serviced companion loan ispari passu in right of payment with the related mortgage loan.

 

The mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street, securing a mortgage loan representing approximately 5.5% of the initial pool balance, also secures a subordinate B note with a principal balance as of the cut-off date of $9,936,740. Such mortgage loan is generally senior in right of payment to the related B note.

 

The portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, securing a mortgage loan representing approximately 2.7% of the initial pool balance, also secures two non-serviced companion loans with an aggregate principal balance as of the cut-off date of $37,070,000. Such non-serviced companion loans arepari passu in right of payment with the related mortgage loan.

 

The mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments, securing a mortgage loan representing approximately 0.7% of the initial pool balance, also secures a non-serviced companion loan with a principal balance as of the cut-off date of $20,850,000. Such non-serviced companion loan ispari passu in right of payment with the related mortgage loan.

 

With respect to three (3) loans, representing approximately 19.5% mortgage of the initial pool balance, the related loan sponsors or their affiliates have entered into mezzanine financing that is secured by pledges of the equity interests in the related mortgage borrower and, in certain cases, indirectly by other interests owned by the related loan sponsors, which other interests do not represent ownership interests in the related mortgaged property. See “Mortgage Loan No. 1 –Charles River Plaza North,” “Mortgage Loan No. 4 – The Panoramic” and “Mortgage Loan No. 11 – Fountains at Andover” on APPENDIX III to this free writing prospectus. The holders of each related

 

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mortgage loan and mezzanine loan have entered into a related intercreditor agreement that governs the rights and duties of such parties. With respect to two (2) mortgage loans, representing approximately 2.7% of the initial pool balance, the related loan sponsors are permitted to enter into future mezzanine financing that is secured by a pledge of some or all of the equity interests in the related borrower;provided that certain debt service coverage ratio and/or loan-to-value ratio tests, as well as other related conditions, are satisfied.

 

In the case of some or all of the mortgage loans with existing subordinate or mezzanine debt, the holder of the subordinate or mezzanine loan has the right to cure certain defaults occurring on the mortgage loan and/or the right to purchase the mortgage loan from the issuing entity if certain defaults on the mortgage loan occur. The purchase price required to be paid in connection with such a purchase is generally equal to the outstanding principal balance of the mortgage loan, together with accrued and unpaid interest on, and all unpaid servicing expenses and advances relating to, the mortgage loan and, to the extent set forth in any related intercreditor agreement, will include special servicing fees, liquidation fees and other additional trust fund expenses. Such purchase price generally does not include a yield maintenance charge or prepayment premium. Accordingly, such purchase (if made prior to the maturity date or anticipated repayment date) will have the effect of a prepayment made without payment of a yield maintenance charge or prepayment premium. In addition, if the holder of the subordinate or mezzanine loan is not obligated to pay some or all of the aforementioned fees and additional expenses, including any liquidation fee payable to the special servicer under the terms of the pooling and servicing agreement, then the exercise of such party’s purchase option may result in a loss to the trust in the amount of those fees and additional expenses.

 

Holders of subordinate debt may also have the right to replace the manager of the related mortgaged property, to approve annual budgets, to approve certain material amendments to the related mortgage loan documents and, in certain cases, replace the special servicer with respect to the related mortgage loan. We make no representation as to whether any other secured subordinate financing currently encumbers any mortgaged property or whether a third-party holds debt secured by a pledge of equity ownership interests in a related borrower.

 

With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as Hyatt Place - Chester, representing approximately 1.2% of the initial pool balance, a preferred equity contribution in the amount of $1,145,786 from the franchise, Hyatt Hotels, was used to refinance existing debt, in addition to the mortgage loan. Further, a third party may have, or may be permitted in the future to have, a preferred equity interest in the related borrower, entitling it to a specified rate of return on its equity investment. A preferred equity investor may also be entitled to consent with respect to certain major decisions relating to the management of the related borrower and may be permitted to cause the managing member of the borrower to enter into a sale of the related mortgaged property. Preferred equity interests may subject the borrower to the same risks and difficulties associated with other types of additional financing on or related to the mortgaged property. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Subordinate and Other Financing” in this free writing prospectus.

 

Generally, all of the mortgage loans also permit the related borrower to incur other unsecured indebtedness, including but not limited to trade payables, in the ordinary course of business and to incur indebtedness secured by equipment or other personal property located at the mortgaged property.

 

Furthermore, borrowers that have not agreed to certain special purpose covenants in the related mortgage loan documents may also be permitted to incur additional financing that is not secured by the mortgaged property.

 

When a mortgage loan borrower, or its constituent members, also has or guarantees one or more other outstanding loans, even if the loans are subordinated or are mezzanine loans not directly secured by the mortgaged property, the issuing entity is subjected to certain risks, including:

 

·the borrower may have difficulty servicing and repaying multiple loans;

 

·the existence of another loan generally will make it more difficult for the borrower to obtain refinancing of the mortgage loan and may thus jeopardize the borrower’s ability to repay any balloon payment due under the mortgage loan at maturity or on its anticipated repayment date;

 

·the need to service additional debt may reduce the cash flow available to the borrower to operate and maintain the mortgaged property; and

 

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·the existence of such debt effectively reduces the equity owners’ economic stake in the related mortgaged property and may increase the likelihood that the owner of a borrower will permit the value or income-producing potential of a mortgaged property to suffer by not making capital infusions to support the mortgaged property.

 

See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Subordinate and Other Financing” in this free writing prospectus.

 

Actions Taken by Other Lenders in a Subordinate or Mezzanine Financing May Affect the Security Available to the Issuing Entity. If the borrower, or its constituent members, is obligated to another lender, actions taken by other lenders could impair the security available to the issuing entity. If another lender files an involuntary bankruptcy petition against the borrower, or the borrower files a voluntary bankruptcy petition to stay enforcement by another lender, the issuing entity’s ability to foreclose on the property will 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.

 

Generally, upon a default under a mezzanine loan, the holder of the mezzanine loan would be entitled to foreclose upon the equity in the related borrower, which has been pledged to secure payment of such mezzanine debt. Although this transfer of equity may not trigger the due on sale clause under the related mortgage loan, it could cause a change in control of the borrower and/or cause the obligor under the mezzanine debt to file for bankruptcy, which could negatively affect the operation of the related mortgaged property and the related borrower’s ability to make payments on the related mortgage loan in a timely manner.

 

Further, if another loan secured by the mortgaged property is in default, the other lender may foreclose on the mortgaged property, absent an agreement to the contrary, thereby causing a delay in payments and/or an involuntary repayment of the mortgage loan prior to maturity. The issuing entity may also be subject to the costs and administrative burdens of involvement in foreclosure proceedings or related litigation.

 

Even if a subordinate lender has agreed not to take any direct actions with respect to the related subordinate debt, including any actions relating to the bankruptcy of the borrower, and has agreed that the holder of the mortgage loan will have all rights to direct all such actions, there can be no assurance that in the event of the borrower’s bankruptcy, a court will enforce such restrictions against a subordinate lender. In its decision in In re 203 North LaSalle Street Partnership, 246 B.R. 325 (Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy Court for the Northern District of Illinois refused to enforce a provision of a subordination agreement that allowed a first mortgagee to vote a second mortgagee’s claim with respect to a Chapter 11 reorganization plan on the grounds that pre-bankruptcy contracts cannot override rights expressly provided by the federal bankruptcy code. This holding, which at least one court has already followed, potentially limits the ability of a senior lender to accept or reject a reorganization plan or to control the enforcement of remedies against a common borrower over a subordinated lender’s objections.

 

For further information with respect to subordinate debt, mezzanine debt and other financing, see APPENDIX II to this free writing prospectus.

 

Bankruptcy Proceedings Relating to a Borrower Can Result in Dissolution of the Borrower and the Acceleration of the Related Mortgage Loan and Can Otherwise Adversely Impact Repayment of the Related Mortgage Loan

 

Under the federal bankruptcy code, the filing of a bankruptcy petition by or against a borrower will stay a sale of real property owned by that borrower, as well as the commencement or continuation of a foreclosure action. In addition, if a court determines that the value of the mortgaged property is less than the principal balance of the mortgage loan it secures, the court may reduce the amount of secured indebtedness to the then current value of the mortgaged property. Such an 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;

 

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·reduce the amount of principal due and owing under a mortgage loan;

 

·change the rate of interest due on a mortgage loan; or

 

·otherwise alter the terms of the mortgage loan, including the repayment schedule.

 

Additionally, the trustee of the borrower’s bankruptcy estate or the borrower, as debtor-in-possession, has special powers to avoid, subordinate or disallow debts. In some circumstances, the claims of the mortgage lender may be subordinated to financing obtained by a debtor-in-possession subsequent to its bankruptcy.

 

The filing of a bankruptcy petition will also stay the lender 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 reduce the lender’s receipt of rents. A bankruptcy court may also permit rents otherwise subject to an assignment and/or lockbox arrangement to be used by the borrower to maintain the mortgaged property or for other court authorized expenses.

 

As a result of the foregoing, the 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.

 

A number of the borrowers under the mortgage loans are limited or general partnerships. Under some circumstances, the bankruptcy of a general partner of the partnership may result in the dissolution of that partnership. The dissolution of a borrower partnership, the winding up of its affairs and the distribution of its assets could result in an early repayment of the related mortgage loan.

 

See also, “—A Borrower’s Other Loans May Reduce the Cash Flow Available to the Mortgaged Property Which May Adversely Affect Payments on Your Certificates” above and “Risk Factors—Tenant Bankruptcy Adversely Affects Property Performance” in the prospectus attached hereto as Exhibit A.

 

Reserves to Fund Certain Necessary Expenditures Under the Mortgage Loans May Be Insufficient for the Purpose for Which They Were Established

 

The borrowers under some of the mortgage loans made upfront deposits, and/or agreed to make ongoing deposits, to reserves for the payment of various anticipated or potential expenditures, such as (but not limited to) the costs of tenant improvements and leasing commissions, recommended immediate repairs and seasonality reserves. We cannot assure you that any such reserve will be sufficient, that borrowers will reserve the required amount of funds or that cash flow from the properties will be sufficient to fully fund such reserves. See APPENDIX I to this free writing prospectus for additional information with respect to the reserves established for the mortgage loans.

 

Borrowers That Are Not Special Purpose Entities May Be More Likely to File Bankruptcy Petitions and This May Adversely Affect Payments on Your Certificates

 

While many of the borrowers have agreed to certain special purpose covenants to limit the bankruptcy risk arising from activities unrelated to the operation of the property, some borrowers may not be special purpose entities. The loan documents and organizational documents of these borrowers that are not special purpose entities generally do not limit the purpose of the borrowers to owning the mortgaged properties and do not contain the representations, warranties and covenants customarily employed to ensure that a borrower is a special purpose entity (such as limitations on indebtedness, affiliate transactions and the conduct of other businesses, restrictions on the borrower’s ability to dissolve, liquidate, consolidate, merge or sell all of its assets and restrictions upon amending its organizational documents). Consequently, these borrowers may have other monetary obligations, and certain of the loan documents provide that a default under any such other obligations constitutes a default under the related mortgage loan.

 

In addition, many of the borrowers and their owners may not have an independent director whose consent would be required to file a bankruptcy petition on behalf of the borrower.

 

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One of the purposes of an independent director is to avoid a bankruptcy petition filing that is intended solely to benefit a borrower’s affiliate and is not justified by the borrower’s own economic circumstances. Therefore, borrowers without an independent director may be more likely to file or be subject to voluntary or involuntary bankruptcy petitions which may adversely affect payments on your certificates. See “Risk Factors—The Borrower’s Form of Entity May Cause Special Risks” in the prospectus attached hereto as Exhibit A.

 

The Operation of Commercial Properties Is Dependent Upon Successful Management

 

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 short-term or month-to-month leases, are generally more management-intensive than properties leased to creditworthy tenants under long-term leases. A property manager, by controlling costs, providing appropriate service to tenants and seeing to property maintenance and general upkeep, can improve cash flow, reduce vacancy, leasing and repair costs and preserve building 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.

 

Many of the mortgaged properties are managed by affiliates of the related borrower, which may not manage properties for non-affiliates. If a mortgage loan is in default or undergoing special servicing, such relationship could disrupt the management of the related mortgaged property, which may adversely affect cash flow. However, the related mortgage loans may permit the lender to remove the related property manager upon the occurrence of an event of default, a decline in cash flow below a specified level or the failure to satisfy some other specified performance trigger (in some cases, subject to lender approval).

 

With respect to ten (10) mortgaged properties that are each leased entirely, or almost entirely, to a single tenant (representing in the aggregate approximately 16.1% of the initial pool balance by allocated loan amount), several of such properties are leased under a net lease pursuant to which the tenant is responsible for all aspects of property management, and as a result there is no management agreement in place with respect to such properties.

 

We make no representation or warranty as to the skills of any present or future managers. Additionally, we cannot assure you that the property managers will be in a financial condition to fulfill their management responsibilities throughout the terms of their respective management agreements. Further, certain individuals involved in the management or general business development at certain mortgaged properties may engage in unlawful activities or otherwise exhibit poor business judgment that adversely affect operations and ultimately cash flow at such properties.

 

The Benefits of Multi-Property or Portfolio Mortgage Loans May Be Limited

 

The mortgage pool includes four (4) mortgage loans, representing in the aggregate approximately 6.5% of the initial pool balance, secured by multiple mortgaged properties (other than through cross-collateralization of a mortgage loan with other mortgage loans). These arrangements attempt to reduce the risk that one mortgaged property may not generate enough net operating income to pay debt service.

 

Cross-collateralization arrangements involving more than one borrower could be challenged as fraudulent conveyances if:

 

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·one of the borrowers were to become a debtor in a bankruptcy case, or were to become subject to an action brought by one or more of its creditors outside a bankruptcy case;

 

·the related borrower did not receive fair consideration or reasonably equivalent value when it allowed its mortgaged real property or properties to be encumbered by a lien benefiting the other borrowers; or

 

·the borrower was insolvent when it granted the lien, was rendered insolvent by the granting of the lien or was left with inadequate capital, or was unable to pay its debts as they matured.

 

Among other things, a legal challenge to the granting of the liens may focus on:

 

·the benefits realized by such borrower entity from the respective mortgage loan proceeds as compared to the value of its respective property; and

 

·the overall cross-collateralization.

 

If a court were to conclude that the granting of the liens was an avoidable fraudulent conveyance, that court could subordinate all or part of the borrower’s respective mortgage loan to existing or future indebtedness of that borrower. The court also could recover payments made under that mortgage loan or take other actions detrimental to the holders of certificates, including, under certain circumstances, invalidating the loan or the related mortgages that are subject to such cross-collateralization.

 

In addition, when multiple real properties secure a mortgage loan or group of cross-collateralized mortgage loans, the amount of the mortgage encumbering any particular one of those properties may be less than the full amount of the related mortgage loan or group of cross-collateralized mortgage loans, generally, to minimize recording tax. This mortgage amount may equal the appraised value or allocated loan amount for the mortgaged property and will limit the extent to which proceeds from the property will be available to offset declines in value of the other properties securing the same mortgage loan or group of cross-collateralized mortgage loans.

 

The foregoing mortgage loans may be secured by mortgaged properties located in various states. Foreclosure actions are brought in state court and the courts of one state cannot exercise jurisdiction over property in another state. Upon a default under any of these mortgage loans, it may not be possible to foreclose on the related mortgaged properties simultaneously.

 

Inadequacy of Title Insurers May Adversely Affect Payments on Your Certificates

 

Title insurance for a mortgaged property generally insures a lender against risks relating to a lender not having a first lien with respect to a mortgaged property as of the date such policy is issued, and in some cases can insure a lender against specific other risks. The protection afforded by title insurance depends on the ability of the title insurer to pay claims made upon it. We cannot assure you that:

 

·a title insurer will have the ability to pay title insurance claims made upon it;

 

·a title insurer will maintain its present financial strength; or

 

·a title insurer will not contest claims made upon it.

 

In addition, title insurance policies do not cover all risks relating to a lender not having a first lien with respect to a mortgaged property, and in certain cases, the lender may be subject to a more senior lien despite the existence of a title insurance policy. In those circumstances, the existence of a senior lien may limit the issuing entity’s recovery on that property, which may adversely affect payments on your certificates.

 

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Mortgaged Properties Securing the Mortgage Loans That Are Not in Compliance with Zoning and Building Code Requirements and Use Restrictions Could Adversely Affect Payments on Your Certificates

 

Noncompliance with zoning and building codes may cause the borrower to experience cash flow delays and shortfalls that would reduce or delay the amount of proceeds available for distributions on your certificates. At origination of the mortgage loans, the mortgage loan originators took steps to establish that the use and operation of the mortgaged properties securing the mortgage loans were in compliance in all material respects with, or were legally existing non-conforming uses or structures under, all applicable zoning, land-use and building ordinances, rules, regulations, and orders. Evidence of this compliance may be in the form of legal opinions, confirmations from government officials, title policy endorsements, appraisals, zoning consultants’ reports and/or representations by the related borrower in the related mortgage loan documents. These steps may not have revealed all possible violations and certain mortgaged properties that were in compliance may not remain in compliance. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as Wichita Falls MF Portfolio, representing approximately 1.7% of the initial pool balance, the related mortgaged property is legal non-conforming as to its use and structure. The related mortgage loan agreement and guaranty provide that upon the occurrence of a casualty or condemnation resulting in the loss of the ability to restore the related mortgaged property to (i) its current size, area, and dimensions and (ii) its current use as a multifamily apartment complex, the related borrower and guarantor are obligated to repay the outstanding debt in full less any insurance proceeds or condemnation awards retained by the lender.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as A Storage Place - Indio II, representing approximately 0.4% of the initial pool balance, the related mortgaged property is currently legally non-conforming as to its use as a self-storage facility. The applicable zoning code states where a non-conforming use status applies to a structure and land in combination, removal or damage to an extent of more than 50% of the fair market value of the property or the structure will thereafter compel the discontinuance of the non-conforming use of the land. There is an additional carve-out for related losses in the related mortgage loan agreement.

 

Some violations of zoning, land use and building regulations may be known to exist at any particular mortgaged property, but the mortgage loan sellers generally do not consider those defects known to them to be material or have obtained policy endorsements and/or law and ordinance insurance to mitigate the risk of loss associated with any material violation or noncompliance. In some cases, the use, operation and/or structure of a mortgaged property constitutes a permitted non-conforming use and/or structure as a result of changes in zoning laws after such mortgaged properties were constructed and the structure may not be rebuilt to its current state or be used for its current purpose if a material casualty event occurs. In some cases, permitted non-conforming uses and/or structures may be subject to the effects of zoning compliance requirements that are not casualty-related, such as the lifting of a parking compliance moratorium. In some cases, the related borrower has obtained law and ordinance insurance to cover additional costs that result from rebuilding the mortgaged property in accordance with current zoning requirements. However, if as a result of the applicable zoning laws the rebuilt improvements are constrained by size or square footage limitations, or otherwise are limited in the type of property that may be rebuilt as compared to the original improvements, any potential loss in income will generally not be covered by law and ordinance insurance. Regardless of the type of insurance, insurance proceeds may not be sufficient to pay the mortgage loan in full if a material casualty event were to occur or if a mortgaged property, as rebuilt for a conforming use, is less valuable or generates less revenue. In such cases, the borrower might experience cash flow delays and shortfalls or be subject to penalties that would reduce or delay the amount of proceeds available for distributions on your certificates.

 

Certain mortgaged properties may be subject to use restrictions pursuant to reciprocal easement or operating agreements which could limit the borrower’s right to operate certain types of facilities within a prescribed radius. These limitations could adversely affect the ability of the borrower to lease the mortgaged property on favorable terms.

 

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The Absence of or Inadequacy of Insurance Coverage on the Property May Adversely Affect Payments on Your Certificates

 

Certain Risks Are Not Covered Under Standard Insurance Policies. The mortgaged properties may suffer casualty losses due to risks that are not covered by insurance (including acts of terrorism) or for which insurance coverage is not adequate or available at commercially reasonable rates. In addition, some of the mortgaged properties are located in Florida, California, Texas, North Carolina, Georgia and the Gulf Coast of the United States, in other coastal areas of certain states, which are areas that have historically been at greater risk of acts of nature, including earthquakes, fires, hurricanes and floods. The mortgage loans generally do not require borrowers to maintain earthquake, hurricane or flood insurance and we cannot assure you that borrowers will attempt or be able to obtain adequate insurance against such risks. If a borrower does not have insurance against such risks and a casualty occurs at a mortgaged property, the borrower may be unable to generate income from the mortgaged property in order to make payments on the related mortgage loan.

 

Moreover, if reconstruction or major repairs are required following a casualty, changes in laws that have occurred since the time of original construction may materially impair the borrower’s ability to effect such reconstruction or major repairs or may materially increase their cost.

 

As a result of these factors, the amount available to make distributions on your certificates could be reduced.

 

Terrorism Insurance May Not Be Available or Adequately Insure Against Risks of Terrorism and Similar Acts. After the September 11, 2001 terrorist attacks in New York City and the Washington, D.C. area, all forms of insurance were impacted, particularly from a cost and availability perspective, including comprehensive general liability and business interruption or rent loss insurance policies required by typical mortgage loans. To give time for private markets to develop a pricing mechanism for terrorism risk and to build capacity to absorb future losses that may occur due to terrorism, the Terrorism Risk Insurance Act of 2002 was enacted on November 26, 2002, establishing the Terrorism Insurance Program. The Terrorism Insurance Program was extended through December 31, 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 and was subsequently reauthorized on January 12, 2015 for a period of six years through December 31, 2020 pursuant to the Terrorism Risk Insurance Program Reauthorization Act of 2015 ( “TRIPRA”).

 

The Terrorism Insurance Program requires insurance carriers to provide terrorism coverage in their basic “all-risk” policies. Any commercial property and casualty terrorism insurance exclusion that was in force on November 26, 2002 is automatically void to the extent that it excluded losses that would otherwise be insured losses. Any state approval of those types of exclusions in force on November 26, 2002 is also void.

 

Under the Terrorism Insurance Program, the federal government shares in the risk of losses occurring within the United States resulting from acts committed in an effort to influence or coerce United States civilians or the United States government. The federal share of compensation for insured losses of an insurer equals 85% (subject to annual 1% decreases beginning in 2016 until such percentage equals 80%) of the portion of such insured losses that exceed a deductible equal to 20% of the value of the insurer’s direct earned premiums over the calendar year immediately preceding that program year. Federal compensation in any program year is capped at $100 billion (with insurers being liable for any amount that exceeds such cap), and no compensation is payable with respect to a terrorist act unless the aggregate industry losses relating to such act exceed $100 million (subject to annual $20 million increases beginning in 2016 until such threshold equals $200 million). The Terrorism Insurance Program does not cover nuclear, biological, chemical or radiological attacks. Unless a borrower obtains separate coverage for events that do not meet the thresholds or other requirements above, such events will not be covered.

 

If the Terrorism Insurance Program is not reenacted after its expiration in 2020, premiums for terrorism insurance coverage will likely increase and the terms of such insurance policies 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 insurance 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 the Terrorism Insurance Program. We cannot assure you that the Terrorism Insurance Program or any successor program will create any long term changes in the availability and cost of such insurance. Moreover, future legislation, including regulations expected to be adopted by the Treasury Department pursuant to TRIPRA, may have a material effect on the availability of federal

 

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assistance in the terrorism insurance market. To the extent that uninsured or underinsured casualty losses occur with respect to the related mortgaged properties, losses on the mortgage loans may result. In addition, the failure to maintain such terrorism insurance may constitute a default under the related mortgage loan.

 

Certain of the mortgage loans are secured by mortgaged properties that are not insured for acts of terrorism. Additionally, certain mortgage loans are secured by mortgaged properties for which coverage for acts of terrorism is required only if certain conditions (such as availability at reasonable rates or maximum cost limits) are satisfied. In both cases, if those casualty losses are not covered by standard casualty insurance policies, then in the event of a casualty from an act of terrorism, the amount available to make distributions on your certificates could be reduced. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, if the Terrorism Risk Insurance Program Reauthorization Act of 2007 (as the same may be amended, restated, supplemented or otherwise modified from time to time) is not in effect, the borrower is only required to obtain terrorism insurance to the extent obtainable for an annual premium not to exceed 200% of the-then applicable premium payable by the borrower for its all risk policy and business interruption insurance.

 

See the summaries of the ten (10) largest mortgage loans or groups of cross-collateralized mortgage loans on APPENDIX III to this free writing prospectus for additional detail regarding terrorism and insurance risks relating to the mortgaged properties securing certain of those mortgage loans.

 

Certain Other Risks Related to Casualty and Casualty Insurance

 

The loan documents for each mortgage loan generally require that (A) “special form” (formerly known as “all-risk”) or “fire and extended perils coverage” insurance policies be maintained in an amount equal to either (i) not less than the full replacement cost of the related mortgaged property or (ii) the lesser of the full replacement cost of each related mortgaged property and the outstanding principal balance of the mortgage loan or (B) the related borrower will maintain such insurance coverages in such amounts as the lender may reasonably require. Certain mortgage loans require that the related mortgaged property be covered by windstorm coverage in an amount that is at least equal to the probable maximum loss as determined by a reputable, independent firm. Notwithstanding such requirement,however, under insurance law, if an insured property is not rebuilt, insurance companies are generally required to pay only the “actual cash value” of the property, which is generally equal to the replacement cost of the property less physical depreciation. The determination of “actual cash value” is both inexact and heavily dependent on facts and circumstances. Notwithstanding the requirements of the loan documents, an insurer may refuse to insure a mortgaged property for the loan amount if it determines that the “actual cash value” of the mortgaged property would be a lower amount, and even if it does insure a mortgaged property for the full loan amount, if at the time of casualty the “actual cash value” is lower, and the mortgaged property is not restored, only the “actual cash value” will be paid. Accordingly, if a borrower does not meet the conditions to restore a mortgaged property and the mortgagee elects to require the borrower to apply the insurance proceeds to repay the mortgage loan, rather than toward restoration, there can be no assurance that such proceeds will be sufficient to repay the mortgage loan, which may adversely affect payments on your certificates.

 

In addition, certain leases may provide that they are terminable in connection with a casualty or condemnation including in the event the leased premises are not repaired or restored within a specified time period. Lease terminations in such circumstances may impair the ability of the related borrower to repay the related mortgage loan and adversely affect payments on your certificates.

 

Furthermore, with respect to certain mortgaged properties, the application of casualty and condemnation proceeds toward restoration of the related mortgaged property may be under the control of, or subject to the consent of, a third party.

 

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Risks Associated with Blanket Insurance Policies or Self-Insurance

 

Certain of the mortgaged properties, including mortgaged properties securing certain of the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, 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). For example, with respect to the top fifteen (15) mortgage loans in the mortgage pool, the properties known as Charles River Plaza North, 261 Fifth Avenue, Westin Hotel at the Domain, The Mall of New Hampshire, 200 Helen Street, Holiday Inn JFK, Pond’s Edge, Preferred Freezer – Lynden, WA, Fountains at Andover and WPC Department Store Portfolio are covered by blanket insurance policies. 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 tenant or an affiliate of the related borrower is permitted to provide self-insurance against risks. 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 a loss occurs. Additionally, the risk of blanket or self-insurance can be magnified if affiliated borrowers under multiple mortgage loans in the trust are covered under the same blanket policy.

 

Property Inspections and Engineering Reports May Not Reflect All Conditions That Require Repair on the Property

 

Licensed engineers or consultants generally inspected the mortgaged properties and prepared engineering reports in connection with the origination or securitization of the mortgage loans to assess items such as integrity of the buildings and other improvements on the mortgaged property, including, structure, exterior walls, roofing, interior construction, mechanical and electrical systems and general condition of the site, buildings and other improvements. However, any such report 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. In those cases where a material condition was disclosed, such condition has been or is required to be remedied to the mortgage loan seller’s satisfaction, or funds as deemed necessary by the mortgage loan seller, or the related engineer or consultant have been reserved to remedy the material condition. No additional property inspections were conducted by us in connection with the issuance of the certificates.

 

Risks Related to Redevelopment and Renovation at the Mortgaged Properties

 

Certain of the mortgaged properties may be currently undergoing or may undergo in the future redevelopment or renovation. As among the twenty (20) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, representing approximately 9.2% of the initial pool balance, the related borrower plans to invest approximately $17.5 million in the related mortgaged property over the next six (6) years. Such renovation is expected to include upgrades to the lobby, façade, mechanicals, common areas, and conversion from an oil to a gas boiler.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 651 Brannan Street, representing approximately 5.9% of the initial pool balance, a reserve in the amount of $3,891,089 was funded at origination of the related mortgage loan to cover estimated tenant improvements related to the Pinterest lease ($3,391,089) and other renovation costs that are the contractual obligation of the landlord ($500,000). The construction is expected to be completed in October 2015, with an expected occupancy date of November 1, 2015. Pinterest is also investing approximately $18,900,000 of its own money to build out its space at the related mortgaged property.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Fountains at Andover, representing approximately 2.9% of the initial pool balance, a reserve in the amount of $99,375 was funded at origination of the related mortgage loan, to cover

 

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the cost of repairs to be carried out at the related mortgaged property, which primarily consist of repair and replacement of wood siding and trim and exterior painting.

 

·With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, representing approximately 2.7% of the initial pool balance, a reserve in the amount of $512,738 was funded at origination of the related mortgage loan, to cover the cost of repairs, which primarily consist of inspection/testing of the sprinkler system and sidewalk repairs, to be carried out at the related mortgaged property.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as DoubleTree McAllen, representing approximately 2.2% of the initial pool balance, a property improvement plan reserve in the amount of $2,221,348 was funded at origination of the related mortgage loan, for improvements to be carried out at the related mortgaged property including an ADA compliance upgrade at the related mortgaged property.

 

There can be no assurance that current or planned redevelopment or renovation will be completed, that such redevelopment or renovation 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, which could affect the ability of the related borrower to repay the related mortgage loan.

 

If the related borrower fails to pay the costs of work completed or material delivered in connection with such ongoing redevelopment or renovation, the portion of the mortgaged property on which there are renovations 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, and accordingly could have a negative effect on net operating income.

 

If the special servicer forecloses on behalf of the trust on a mortgaged property that is being redeveloped or renovated, pursuant to the REMIC provisions, the special servicer will only be permitted to arrange for completion of the redevelopment or renovation if at least 10% of the costs of construction were incurred at the time the default on the related mortgage loan became imminent. As a result, the issuing entity may not realize as much proceeds upon disposition of a foreclosure property as it would if it were permitted to complete construction.

 

Debt Service Coverage Ratio and Net Cash Flow Information is Based on Numerous Assumptions

 

As described under “Description of the Mortgage Pool—Additional Mortgage Loan Information,” underwritten net cash flow means cash flow (including in certain instances any cash flow from master leases and interest guarantees) adjusted based on a number of assumptions and subjective judgments used by the mortgage loan sellers. Some assumptions and subjective judgments related to future events, conditions and circumstances, including future income and expense levels, and the re-leasing of occupied space, which will be affected by a variety of complex factors over which none of the issuing entity, the depositor, the mortgage loan sellers, the master servicer, the special servicer, the trust advisor, the certificate administrator, the trustee or the custodian have control. In some cases, the underwritten net cash flow for any mortgaged property is higher or lower, and may be materially higher or lower, than the actual annual net operating income for that mortgaged property, based on historical operating statements. If ultimately proven erroneous, such assumptions could cause the actual operating income for such mortgaged property to differ materially from the underwritten net cash flow set forth in this free writing prospectus. No representation is made that the underwritten net cash flow set forth in this free writing prospectus as of the cut-off date or any other date represents future net cash flows. You should review the types of assumptions described below and make your own determination of the appropriate assumptions to be used in determining underwritten net cash flow.

 

The underwritten net cash flow and underwritten net operating income for such mortgaged properties are derived principally from current rent rolls or tenant leases and historical expenses, adjusted to account for inflation, contractual rent increases, significant occupancy increases and a market rate management fee. In some cases, underwritten net cash flow and underwritten net operating income are based on tenants that may have signed a lease

 

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or lease amendment expanding its space but are not yet in occupancy, in operation and/or paying rent, or on tenants paying temporarily abated rent. There can be no assurance that such tenants will be in a position to pay full rent when in occupancy or when any free rent or rent abatement period expires.

 

With respect to any such tenants, we cannot assure you that these tenants will take occupancy, begin paying rent or accept possession of the premises, as applicable. If these tenants do not take occupancy of the leased space and/or begin paying rent, such tenants may, in some cases, be permitted to terminate the related lease. This will result in a higher vacancy rate and re-leasing costs that may adversely affect cash flow on the related mortgage loan. As among the twenty (20) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, representing approximately 9.2% of the initial pool balance, the largest tenant, Dan Klores Communication, has two (2) months of free rent (November 2015 and December 2015), totaling $69,650. At the related mortgage loan closing, the borrower deposited $457,936 with the lender related to this free rent period in addition to free rent periods for other tenants at the related mortgaged property.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 651 Brannan Street, representing approximately 5.9% of the initial pool balance, the largest tenant at the related mortgaged property, Pinterest, which occupies approximately 75.0% of the net rentable area, is in the process of building out its space at the related mortgaged property and is therefore not yet in occupancy. It is expected that Pinterest will take occupancy in November 2015.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Kensington Commons, representing approximately 2.0% of the initial pool balance, a retail grocery tenant, Stehly Farms Market, signed a lease for 4,836 square feet and is expected to take occupancy in September 2015.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Rancho Carmel Plaza, representing approximately 1.3% of the initial pool balance, the fourth largest tenant, We Rock the Spectrum, has six (6) months of free rent. At mortgage loan origination, borrower deposited $17,171 with the lender related to this free rent period. The tenant is expected to take occupancy in October 2015.

 

In addition, certain tenants may have sub-leased all or substantially all of their space. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples include the following:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, representing approximately 9.2% of the initial pool balance, the third largest tenant at the mortgaged property, Mistdoda Capital LLC, which occupies approximately 8.7% of the net rentable area, is currently subleasing all of its space through October 31, 2017 (the end of its lease term) to three subtenants: Christine Valmy International School, Inc. (12,757 square feet), The Norwest Company, LLC (12,757 square feet) and Badger & Winters Group, Inc. (12,757 square feet).

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street, representing approximately 5.5% of the initial pool balance, the fourth largest tenant at the mortgaged property, Jimmy’s Trucking, which occupies approximately 5.9% of the net rentable area, is currently subleasing 32,000 square feet of its space to Champion Pool Distributors Corp.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Antioch Crossings Shopping Center, representing approximately 2.3% of the initial pool balance, the fifth largest tenant at the mortgaged property, Dad’s Café, which occupies approximately 2.5% of the net rentable area, has been subleasing its space since August 2010, with the

 

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sublease term due to expire on October 31, 2015. The subtenant is currently operating a restaurant at the space.

 

In addition, certain tenants currently may be in a “free rent” or rent abatement period, although the related mortgage loan may have been underwritten as though such tenant were currently paying full rent. There can be no assurance that such tenants will be in a position to pay full rent when any such period expires. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, for example:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Preferred Freezer - Lynden, WA, representing approximately 3.3% of the initial pool balance, a reserve in the amount of $939,043 was funded at origination of the related mortgage loan, to cover free rent owed to Preferred Freezer Services.

 

The amounts representing net operating income and underwritten net cash flow are not a substitute for, or an improvement upon, net income (as determined in accordance with generally accepted accounting principles) as a measure of the results of the mortgaged property’s operations, or a substitute for cash flows from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity.

 

In addition, the debt service coverage ratios set forth in this free writing prospectus for the mortgage loans and the mortgaged properties vary, and may vary substantially, from the debt service coverage ratios for the mortgage loans and the mortgaged properties as calculated pursuant to the definition of such ratios as set forth in the related mortgage loan documents.

 

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. 100.0% of the mortgage loans have appraisals dated within the twelve (12) months prior to the cut-off date.

 

In certain cases, appraisals may reflect both “as-stabilized” and “as-is” values, although the appraised values reflected in this free writing prospectus with respect to the mortgaged properties generally reflect only the “as-is” value unless otherwise stated herein.

 

For example, with respect to the mortgage loan secured by a mortgaged property identified on APPENDIX I to this free writing prospectus as 651 Brannan Street, representing approximately 5.9% of the initial pool balance, the appraised value shown on APPENDIX I represents (and, unless otherwise clearly indicated, used for purposes of calculations set forth in this free writing prospectus) the “Market Value As-Is With Reserves” appraised value of $97,900,000 as of June 18, 2015. The “Market Value As-Is With Reserves” is calculated reflecting the fact that the lender has fully reserved the outstanding landlord’s contribution to the incoming tenant’s leasing commissions and tenant improvements. The “As-Is” value as of June 18, 2015 is $92,000,000.

 

For example, with respect to the mortgage loan secured by a mortgaged property identified on APPENDIX I to this free writing prospectus as Preferred Freezer-Lynden, WA, representing approximately 3.3% of the initial pool balance, the appraised value shown on APPENDIX I represents (and, unless otherwise clearly indicated, used for purposes of calculations set forth in this free writing prospectus) the “As Stabilized” appraised value of $43,000,000 as of June 1, 2016. The “As-is” appraised value was derived by deducting approximately $900,000 in loss rental income from the “As Stabilized” appraised value. The “As-Is” value as of August 25, 2015 is $42,000,000.

 

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 another appraiser. 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. Moreover, the values of the mortgaged properties may have fluctuated significantly since the appraisals were performed. The 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 that could be obtained from the sale of a mortgaged property under a distress or

 

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liquidation sale. We cannot assure you that the information set forth in this free writing prospectus regarding appraised values or loan-to-value ratios accurately reflects past, present or future market values of the mortgaged properties.

 

The Timing of Mortgage Loan Amortization May Cause Increased Pool Concentration, Which May Adversely Affect Payments on Your Certificates

 

As principal payments or prepayments are made on mortgage loans, the remaining mortgage pool may be subject to increased concentrations of property types, geographic locations and other pool characteristics of the mortgage loans and the mortgaged properties, some of which may be unfavorable. Classes of certificates that have a lower payment priority are more likely to be exposed to this concentration risk than are certificate classes with a higher payment priority. This occurs because realized losses are allocated to the class outstanding at any time with the lowest payment priority and principal on the certificates entitled to principal is generally payable in sequential order or alphanumeric order, with such classes generally not being entitled to receive principal until the preceding class or classes entitled to receive principal have been retired.

 

The Operation of the Mortgaged Property Following Foreclosure of the Mortgage Loan May Affect the Tax Status of the Issuing Entity and May Adversely Affect Payments on Your Certificates

 

If the issuing entity acquires a mortgaged property pursuant to a foreclosure or deed in lieu of foreclosure, the special servicer will generally be required to retain an independent contractor to operate and manage 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 more than 10% completed when default on the mortgage loan becomes imminent. Furthermore, any (i) net income from such operation (other than qualifying “rents from real property”), (ii) rental income based on the net profits of a tenant or sub-tenant or allocable to a non-customary service and (iii) rental income attributable to personal property leased in connection with a lease of real property, if the rent attributable to the personal property exceeds 15% of the total rent for the taxable year, will subject the Lower-Tier REMIC to federal tax on such income at the highest marginal corporate tax rate (currently 35%) and possibly state or local tax. No determination has been made whether any portion of the income from the mortgaged properties constitutes “rents from real property.” In the event the issuing entity acquires mortgaged properties that do not generate “rents from real property,” the net proceeds available for distribution to certificateholders may be reduced. Nevertheless, the special servicer may permit the Lower-Tier REMIC to earn “net income from foreclosure property” that is subject to tax if it determines that the net after tax benefit to certificateholders is greater than under another method of operating or leasing the mortgaged property.

 

In addition, if the issuing entity were to acquire one or more mortgaged properties pursuant to a foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged properties, the issuing entity may in certain jurisdictions, particularly in New York, be required to pay state or local transfer or excise taxes upon liquidation of the properties. These state or local taxes may reduce net proceeds available for distribution with respect to the certificates.

 

Tenant Leases May Have Provisions That Could Adversely Affect Payments on Your Certificates

 

In certain jurisdictions, if a tenant lease is subordinate to the lien created by the mortgage and does not contain attornment provisions which require the tenant to recognize a successor owner (following foreclosure) as landlord under the lease, such lease may terminate upon the transfer of the property to a foreclosing lender or purchaser at foreclosure. Not all leases were reviewed to ascertain the existence of these provisions. Accordingly, if a mortgaged property is located in such a jurisdiction and is leased to such a tenant, such mortgaged property could experience a further decline in value if such tenant’s lease were terminated. This is particularly likely if such tenants were paying above-market rents or could not be replaced.

 

Some of the leases at the mortgaged properties may not be subordinate to the related mortgage, in which case the issuing entity will not possess the right to dispossess the tenant upon foreclosure of the mortgaged property. In addition, if the lease contains provisions inconsistent with the mortgage (e.g., with respect to the application of

 

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insurance proceeds or condemnation awards) or which could affect the enforcement of the lender’s rights (e.g., an option to purchase the mortgaged property or a related right of first refusal), the provisions of the lease will control.

 

Additionally, with respect to certain of the mortgage loans, the related borrower may have granted certain tenants or certain third parties a right of first offer or right of first refusal with respect to, or an option to purchase, all or a portion of the mortgaged property. In addition, state statutes may grant a right of first refusal to certain designated parties. Such provisions, if not waived or subordinated, may impede the lender’s ability to sell the related mortgaged property at foreclosure or adversely affect the foreclosure bid price. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, the following are examples of mortgage loans with associated purchase options, rights of first offer or rights of first refusal, as applicable:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, the mortgaged property consists of one condominium unit in a two-unit condominium structure. The owner of the other condominium unit has a right of first offer and a right of first refusal to purchase the mortgaged property in the event the borrower intends to sell the mortgaged property. Neither the right of first offer nor the right of first refusal will apply to a foreclosure or deed-in-lieu of foreclosure under the mortgage loan. Furthermore, provided the tenant is not in default beyond all applicable notice and grace periods, the tenant has a right of first refusal with respect to the first lease of each portion of the space that is has surrendered.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, the sole tenant at the mortgaged property, Massachusetts General Hospital, has a right to purchase the mortgaged property if (a) as a result of the borrower’s negligence, willful misconduct or failure to perform its obligations under the tenant’s lease (unless the failure is caused in whole or in part by the action or inaction of the tenant), the life safety, mechanical electrical and/or plumbing systems of the mortgaged property are affected in a manner which materially and adversely interferes with tenant’s operations in at least 200,000 rentable square feet of the leased premises for a period of 180 consecutive days, (b) in the event of a major casualty affecting the leased premises, the borrower does not commence restoration of the mortgaged property within one year of such casualty or complete such restoration by an outside date specified by borrower in a restoration schedule submitted by the borrower to the tenant, or (c) in the event of a major taking, the borrower (i) exercises its right to terminate the lease or (ii) does not commence restoration of the portion of the mortgaged property that is not affected by the taking within one year of such taking or fails to complete such restoration by an outside date specified by the borrower in a restoration schedule submitted by the borrower to the tenant. If the tenant validly exercises its purchase option, it is entitled to purchase the mortgaged property at a price equal to the greater of (a) the fair market value of the mortgaged property determined in accordance with the lease documents and (b) the outstanding amount of the mortgage loan, including all principal, interest, default interest, and other costs, expenses or amounts incurred in connection with the mortgage loan. Pursuant to a subordination, non-disturbance and attornment agreement with the lender, the tenant may not exercise its purchase option while the mortgage loan is outstanding unless it (a) satisfies the assumption conditions set forth in the mortgage loan documents, defeases the mortgage loan in accordance with the terms and conditions of the mortgage loan documents or (b) to the extent the borrower is permitted to prepay the mortgage loan pursuant to the mortgage loan documents, the tenant prepays the mortgage loan in accordance with the terms and conditions of the mortgage loan documents. In addition, the tenant may elect, solely in connection with the exercise of any extension option, to surrender either (i) any one entire floor of the fifth, sixth, seventh, or eighth floors or (ii) any two entire contiguous floors of the fifth, sixth, seventh, or eighth floors to the landlord effective upon the first day of the applicable option term. The tenant may not surrender more than an aggregate of two floors in the exercise of its rights and all such floors must be contiguous to each other. The tenant must make such election, if any, in the extension notice. If the tenant fails to make such election in a timely fashion, the tenant will be deemed to have waived the surrender option with respect the extension notice in question. Provided the tenant is not in default beyond all applicable notice and grace periods, the tenant has a right of first refusal with respect to the first lease of each portion of the space that it has surrendered based on the above provision.

 

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·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 651 Brannan Street, representing approximately 5.9% of the initial pool balance, the largest tenant at the mortgaged property, Pinterest, which occupies approximately 75.0% of the net rentable area, has a right of first offer to lease the remaining space on the third floor of the mortgaged property that is currently occupied by XO Communications (15,950 square feet) and a right of first offer to purchase the mortgaged property.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as 200 Helen Street, representing approximately 5.5% of the initial pool balance, the third largest tenant at the mortgaged property, Prevost Car, Inc., which occupies approximately 7.6% of the net rentable area, has a continuing right of first offer to lease two directly contiguous spaces (60,000 square feet and 47,000 square feet upon notification from the landlord that the space(s) have or will become available with notice no later than fifteen (15) business days from the date of notification.

 

·With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as WPC Department Store Portfolio, representing approximately 2.7% of the initial pool balance, if the landlord decides to offer the leased premises to any third party, the landlord must first offer (by written notice) to sell the leased premises to the sole tenant at the mortgaged property, MCRIL, LLC (aka Bon-Ton), for a specific purchase price prior to offering to sell the leased premises to any such third party. If the tenant rejects or does not timely accept the offer, the tenant will be deemed to have forever waived and relinquished its right to such offer, except that if the third party sale price is less than 95% of the right of first offer purchase price, the tenant will have fifteen (15) days to accept the third party price.

 

Risks of Lease Early Termination Options

 

Leases often give tenants the right to terminate the related lease or abate or reduce the related rent:

 

·if the landlord/borrower of the applicable mortgaged property allows uses at the mortgaged property in violation of use restrictions in current tenant leases;

 

·if the landlord/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;

 

·if the related landlord/borrower fails to provide a designated number of parking spaces;

 

·if there is construction at the related mortgaged property or an adjacent property (whether or not such adjacent property is owned or controlled by the landlord/borrower or any of its affiliates) that may interfere with visibility or a tenant’s use of the mortgaged property;

 

·upon casualty or condemnation with respect to all or a portion of the mortgaged property that renders such mortgaged property unsuitable for a tenant’s use or if the landlord/borrower fails to rebuild such mortgaged property within a certain time;

 

·if a tenant’s use is not permitted by zoning or applicable law; or

 

·if the landlord/borrower defaults on its obligations under the lease.

 

In each identified instance the borrower may have interests adverse to the lender, and we cannot assure you that the landlord/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. Certain other tenants may have the right to terminate the related lease or abate or reduce the related rent if the related landlord/borrower violates covenants under the related lease or if third parties take certain actions that adversely affect such tenants’ business or operations. We cannot assure you that all or any of the landlords/borrowers will comply with their lease covenants or such third parties will act in a manner required to avoid any termination and/or abatement rights of the related tenant.

 

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In addition, it is common for non-anchor tenants at anchored or shadowed anchored retail centers to have the right to terminate their lease or abate or reduce rent if the anchor or shadow anchor tenant goes dark. Even if non-anchor tenants do not have 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 tenant’s ability to operate, which may in turn adversely impact the landlord’s/borrower’s ability to meet its obligations under the related loan documents. If an anchor tenant goes dark, generally the landlord’s/borrower’s only remedy is to terminate that lease after the anchor tenant has been dark for a specified amount of time. See “—The Related Borrowers May Have Difficulty Re-Leasing Mortgaged Properties” above.

 

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 such tenants fail to meet certain sales targets or other business objectives for a specified period of time or if a certain number of anchor tenants, shadow anchors and/or a percentage of the tenants cease to operate at the applicable mortgaged property. In certain cases, the related tenant may be permitted to terminate its lease in its sole discretion without any such triggers. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Certain Mortgage Loans with Material Lease Termination Options.”

 

Certain mortgaged properties may be leased in whole or in part to government sponsored tenants who have the right to cancel their leases at any time because of lack of appropriations or otherwise. See APPENDIX I to this free writing prospectus for an identification of any government sponsored tenant that constitutes one of the five (5) largest tenants (or, if applicable, the single tenant) at any mortgaged property.

 

In addition, certain mortgaged properties may have tenants that are charitable or other non-profit institutions that generally rely on contributions from individuals and government grants or other subsidies to pay rent on office space and other operating expenses. For example, with respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, the sole tenant at the related mortgaged property, Massachusetts General Hospital, is a not-for-profit healthcare system. With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as The Panoramic, representing approximately 6.9% of the initial pool balance, the two largest tenants at the related mortgaged property known as San Francisco Conservatory of Music and California College of Arts, which each occupy approximately 48.6% of the net rentable area, are not-for-profit entities. There may be other mortgaged properties that are leased to tenants that are charitable or non-profit institutions, some of which tenants are identified on APPENDIX I to this free writing prospectus. There can be no assurance that the rate, frequency and level of individual contributions or governmental grants and subsidies will continue with respect to any such institution. A reduction in contributions or grants may impact the ability of the related institution to pay rent, and there can be no assurance that the related borrower will be in a position to meet its obligations under the related mortgage loan documents if such tenant fails to pay its rent.

 

In general, the related mortgage loan sellers have underwritten the mortgage loans with lease expiration dates matching the related early termination option date. However, 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 loan documents.

 

The Performance of a Mortgage Loan and Its Related Mortgaged Property Depends in Part on Who Controls the Borrower and Mortgaged Property

 

The operation and performance of a mortgage loan will depend in part on the identity of the persons or entities who control the borrower and the mortgaged property. The performance of a mortgage loan may be adversely affected if control of a borrower changes, which may occur, for example, by means of transfers of direct or indirect ownership interests in the borrower, or if the mortgage loan is assigned to and assumed by another person or entity along with a transfer of the property to that person or entity.

 

Many of the mortgage loans generally place certain restrictions on the transfer and/or pledging of general partnership and managing member equity interests in a borrower such as specific percentage or control limitations.

 

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The terms of the mortgages generally permit, subject to certain limitations, affiliate, estate planning and family transfers and the transfer or pledge of less than a controlling portion of the partnership, members’ or other non-managing member equity interests in a borrower. Certain of the mortgage loans do not restrict the pledging of direct or indirect ownership interests in the related borrower, but do restrict the transfer of ownership interests in the related borrower by imposing a specific percentage, a control limitation or requiring the consent of the mortgagee to any such transfer. Certain of the mortgage loans do not prohibit the pledge by direct or indirect owners of the related borrower of equity distributions that may be made from time to time by the borrower to its equity owners. We cannot assure you the ownership of any of the borrowers would not change during the term of the related mortgage loan and result in a material adverse effect on your certificates.

 

Litigation, Bankruptcy or Other Legal Proceedings Could Adversely Affect the Mortgage Loans

 

There may be pending or threatened legal proceedings against, or other past or present adverse regulatory circumstances experienced by, the borrowers, their sponsors and managers of the mortgaged properties and their respective affiliates related to the business of or arising out of the ordinary business of the borrowers, their sponsors, managers and affiliates.

 

·For example, with respect to the mortgaged property identified on APPENDIX I to this free writing prospectus as 261 Fifth Avenue, securing a mortgage loan representing approximately 9.2% of the initial pool balance, one of the two (2) guarantors (Jeffrey Feil) is named as defendant in a lawsuit initiated by various family members/ shareholders alleging mismanagement of certain family businesses and seeking dissolution and liquidation of the related business assets. Mr. Feil assumed control of the businesses following the death of his parents. Specifically, the plaintiffs’ claims include that Mr. Feil, using his voting control, engaged in a scheme to restrict cash distributions and coerce the family members to sell their interests in the family businesses to Mr. Feil at unconscionably low prices. Additional claims include Mr. Feil’s misappropriation of insurance proceeds following Hurricane Katrina. Certain information concerning the related proceedings is under seal because of existing confidentiality agreements. We cannot assure you that such litigation will not be adversely adjudicated, or that there will not be any material adverse effects on Mr. Feil’s business or on the operation of the related mortgaged property as a result.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Pond’s Edge, representing approximately 3.8% of the initial pool balance, one of the related guarantors was involved in: (i) a 2009 dispute with RBS Citizens regarding a defaulted loan secured by a retail property in Concord, Pennsylvania whereby judgment was made in favor of RBS Citizens for $8.7 million in March 2010, in both Pennsylvania and Delaware state court. In addition, the same guarantor has current litigation pending against him for $6.2 million stemming from his divorce from his former wife in 2006.

 

·With respect to the mortgage loan secured by the portfolio of mortgaged properties identified on APPENDIX I to this free writing prospectus as Wichita Falls MF Portfolio, representing approximately 1.7% of the initial pool balance, the related guarantors, Vinod K. Gupta and Chnaresh Gupta, and/or entities controlled by them are involved in the following four civil litigations, which are currently pending.

 

·Two cases filed in Oklahoma and California relate to a $7,000,000 loan on the Lincoln Plaza Office Building located in Oklahoma City, Oklahoma. The Oklahoma case involves foreclosure proceedings against the Lincoln property and a final order granting foreclosure was entered into by the court on May 5, 2015. The plaintiff has not yet executed the judgment. The California case is asserting that the defendant failed to turn over business interruption proceeds and it is currently in non-binding mediation. The court appointed mediator has recommended a settlement amount of $1,470,000 of which approximately $820,000 is being held in escrow with the court. The sponsor is currently in negotiation for a settlement payment.

 

·One case is a foreclosure action on land parcels acquired by the sponsor in St. Thomas, Virgin Islands in 2010. The case is currently in settlement negotiations and it is reported that the lender has agreed to consider the terms of a short sale of the property. The sponsor has received an offer for the property for $700,000, which is currently being processed for approval.

 

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·The remaining case relates to the sponsor’s medical practice. According to the complaint, the plaintiff in this case suffered damages in the amount of at least $500,000 and also seeks unspecified penalties, interest, fees, and costs. The plaintiff did not allege a sum certain.

 

Any such litigation or proceedings could adversely impact the related borrower’s ability to meet its obligations under the related mortgage loan and, as a result, have a material adverse effect on your certificates.

 

In addition, certain of the borrower sponsors, property managers, affiliates thereof and/or entities controlled thereby have been a party to bankruptcy proceedings, mortgage loan defaults and restructures, discounted payoffs, foreclosure proceedings or deed-in-lieu of foreclosure transactions, or other material proceedings (including criminal proceedings) in the past, which in some cases may have involved the same property that currently secures the related mortgage loan. In most, but not all cases relating to bankruptcy, the related entity or person has emerged from bankruptcy or, in the case of previous foreclosure actions, is generally, but not in all cases, not permitted to directly or indirectly manage the related borrower. 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. As among the fifteen (15) largest mortgage loans or groups of cross-collateralized mortgage loans in the mortgage pool, examples within the past ten (10) years include:

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Charles River Plaza North, representing approximately 9.6% of the initial pool balance, the related guarantors were previously involved in two deeds-in-lieu of foreclosures and a discounted payoff; all such loans have been settled.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Fountains at Andover, representing approximately 2.9% of the initial pool balance, the sponsors were previously involved in three foreclosures, four discounted payoffs and fifteen maturity defaults in the past ten years. Of the fifteen maturity defaults, three resulted in reduction in debt and or discounted payoff, eleven loans received an extension and/or were ultimately repaid in full, and one property is under contract of sale. All defaults occurred between October 2009 and March 2012.

 

Certain of the borrower sponsors may have a history of litigation or other proceedings against their lender, in some cases involving various parties to a securitization transaction. There can be no assurance that the borrower sponsors that have engaged in litigation or other proceedings in the past will not commence action against the trust in the future upon any attempt by the special servicer to enforce the mortgage loan documents. Any such actions by the borrower or borrower sponsor may result in significant expense and potential loss to the issuing entity and a shortfall in funds available to make payments on the offered certificates.

 

If a borrower or a principal of a borrower or affiliate has been a party to a bankruptcy, foreclosure, litigation or other proceeding, particularly against a lender, 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 federal bankruptcy code or otherwise, in the event of an action or threatened action by the lender 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.

 

Further, 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), whether or not related to the mortgage loans. There can be no assurance that any such proceedings or similar proceedings with respect to borrowers, principals of borrowers, property managers and affiliates thereof will not negatively impact a borrower’s or loan sponsor’s ability to meet its obligations under the related mortgage loan and, as a result could have a material adverse effect upon your certificates.

 

Often it is difficult to confirm the identity of owners of all of the equity in a borrower, which means that past issues may not be discovered as to such owners. We cannot assure you that any such actions, suits or proceedings would not have a material adverse effect on your certificates.

 

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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.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as The Panoramic, representing approximately 6.9% of the initial pool balance, two of the three tenants at the mortgaged property, California College of the Arts, which represents approximately 48.6% of the net rentable area, and the San Francisco Conservatory of Music, which represents approximately 48.6% of the net rentable area, each receive 100% tax abatements for their pro rata share of the mortgaged property, based on their nonprofit status.

 

·With respect to the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Holiday Inn JFK, representing approximately 4.6% of the initial pool balance, the mortgaged property currently receives an industrial and commercial abatement program exemption of $757,732 per year, which is phased out over the next fifteen (15) years.

 

Some of these programs or arrangements may be 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 obligations for the related borrower. An increase in real estate taxes may impact the ability of the borrower to pay debt service on its mortgage loan. 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 termination of any such program could affect the ability of the related borrower to repay the related mortgage loan.

 

Risks Relating to Tax Credits

 

With respect to certain mortgage loans secured by multifamily properties, the related property owners may be entitled to receive low-income housing tax credits pursuant to Section 42 of the Internal Revenue Code, which provides a tax credit for owners of multifamily rental properties meeting the definition of low-income housing, who receive a tax credit allocation from the state tax credit allocating agency. The total amount of tax credits to which the property owner is entitled is based upon the percentage of total units made available to qualified tenants. The owners of the mortgaged properties subject to the tax credit provisions may use the tax credits to offset income tax that they may otherwise owe and the tax credits may be shared among the equity owners of the project. In general, the tax credits on the mortgage loans have been allocated to equity investors in the borrower.

 

The tax credit provisions limit the gross rent for each low-income unit. Under the tax credit provisions, a property owner must comply with the tenant income restrictions and rental restrictions over a minimum 15-year compliance period, although the property owner may take the tax credits on an accelerated basis over a 10-year period. In the event a multifamily rental property does not maintain compliance with the tax credit restrictions on tenant income or rental rates or otherwise satisfy the tax credit provisions of the Internal Revenue Code, the property owner may suffer a reduction in the amount of available tax credits and/or face the recapture of all or part of the tax credits related to the period of noncompliance and face the partial recapture of previously taken tax credits. The loss of tax credits, and the possibility of recapture of tax credits already taken, may provide significant incentive for the property owner to keep the related multifamily rental property in compliance with these tax credit restrictions, which may limit the income derived from the related property.

 

If the issuing entity were to foreclose on such a property it would be unable to take advantage of the tax credits, but could sell the property with the right to the remaining credits to a tax paying investor. Any subsequent property owner would continue to be subject to rent limitations unless an election was made to terminate the tax credits, in which case the property could be operated as a market rate property after the expiration of three years. The limitations on rent and on the ability of potential buyers to take advantage of the tax credits may limit the issuing entity’s recovery on that property.

 

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The Mortgage Loans Have Not Been Reunderwritten By Us

 

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 related sponsor and the remedies for breach of a representation and warranty, as described under “Description of the Mortgage Pool—Representations and Warranties” and “—Repurchases and Other Remedies” in this free writing prospectus.

 

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 would have revealed problems with a mortgage loan not covered by a representation or warranty or would have revealed inaccuracies in the representations and warranties. See “—Risks Related to the Offered Certificates—Mortgage Loan Sellers May Not Make a Required Repurchase or Substitution of a Defective Mortgage Loan” below, and “Description of the Mortgage Pool—Representations and Warranties” and “—Repurchases and Other Remedies” in this free writing prospectus.

 

A review of the mortgage loans in the pool has been conducted by the mortgage loan sellers as required by Rule 193 under the Securities Act of 1933. As part of such review, each mortgage loan seller and/or one of the underwriters on their behalf engaged a third party accounting firm to compare certain information set forth in this free writing prospectus against certain source documents and engaged one or more law firms to review certain loan and asset information. See “Transaction Parties—The Sponsors, Mortgage Loan Sellers and Originators—UBS Real Estate Securities Inc.—UBSRES’ Underwriting Standards” and “—Bank of America, National Association—Bank of America’s Commercial Mortgage Loan Underwriting Standards” in this free writing prospectus.

 

Risks Related to Conflicts of Interest

 

Conflicts of interest may have an adverse effect on your certificates. Each of the following relationships should be considered carefully by you before you invest in any certificates. In addition, investors should note that with respect to any non-serviced mortgage loan (including the 261 Fifth Avenue mortgage loan following the securitization of the relatedpari passu companion loan), conflicts similar to those described below may arise with respect to any securitization governing the related non-serviced loan combination.

 

Conflicts Between Various Certificateholders

 

The special servicer is given considerable latitude in determining whether and in what manner to liquidate or modify defaulted mortgage loans. During any Subordinate Control Period, the controlling class representative, if any, will have the right to replace the special servicer upon satisfaction of certain conditions set forth in the pooling and servicing agreement (other than, to the extent set forth in the related intercreditor agreement, with respect to any A/B whole loan or loan pair for so long as the related B note holder or serviced companion loan holder is the directing holder with respect to such A/B whole loan or loan pair, as applicable, and other than with respect to any non-serviced mortgage loan or excluded mortgage loan);provided, that any such replacement without cause may only occur if (i) LNR Partners, LLC or its affiliate is no longer the special servicer or (ii) LNR Securities Holdings, LLC or its affiliate owns less than 15% of the then controlling class of certificates. At any given time, the controlling class representative will be controlled generally by the holders of the most subordinate class of Control Eligible Certificates then outstanding that has an aggregate certificate principal balance (as notionally reduced by any appraisal reductions allocable to such class) at least equal to 25% of the initial certificate principal balance of such class, and such holders may have interests in conflict with those of the holders of the other certificates. In addition, during any Subordinate Control Period (other than, to the extent set forth in the related intercreditor agreement, with respect to any A/B whole loan or loan pair for so long as the related B note holder or serviced companion loan holder is the directing holder with respect to such A/B whole loan or loan pair, as applicable, and other than with respect to any non-serviced mortgage loan) the controlling class representative will have the right to advise the special servicer, or will otherwise have approval rights, with respect to certain actions of the special servicer and, in connection with such rights, may act solely in the interest of the holders of certificates of the controlling class, without any liability to any certificateholder. For instance, the holders of certificates of the controlling class might desire to mitigate the potential for loss to that class from a troubled mortgage loan by deferring enforcement in the hope of maximizing future proceeds. However, the interests of the issuing entity may

 

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be better served by prompt action, since delay followed by a market downturn could result in less proceeds to the issuing entity than would have been realized if earlier action had been taken. In general, neither the master servicer nor the special servicer is required to act in a manner more favorable to the offered certificates than to the privately offered certificates. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus. With respect to any non-serviced mortgage loan serviced pursuant to the pooling and servicing agreement for another securitization, similar conflicts of interest may arise with respect to the controlling class representative, master servicer and special servicer under such securitization.

 

The master servicer or the special servicer or an affiliate of either of them may hold subordinate mortgage notes or acquire certain of the most subordinated certificates, including those of the initial controlling class. The master servicer or the special servicer or an affiliate of either of them may also hold a material economic interest in the borrower under a mortgage loan that it is servicing,provided, that if LNR Partners, LLC is an affiliate of a borrower or property manager with respect to a mortgage loan, a replacement special servicer will be appointed with respect to such mortgage loan. See “Servicing of the Mortgage Loans—The Special Servicer—Replacement of the Special Servicer and Appointment of an Excluded Special Servicer” in this free writing prospectus. In addition, under certain circumstances the master servicer or the special servicer may be entitled to purchase defaulted mortgage loans and/or REO property from the issuing entity as described in this free writing prospectus. Under such circumstances, the master servicer and the special servicer may have interests that conflict with the interests of the other holders of the certificates and/or the issuing entity. In addition, the master servicer and the special servicer will service loans other than those included in the issuing entity in the ordinary course of their business. In these instances, the interests of the master servicer or the special servicer, as applicable, and their respective clients may differ from and compete with the interests of the issuing entity, and their activities may adversely affect the amount and timing of collections on the mortgage loans in the issuing entity notwithstanding the fact that the pooling and servicing agreement will provide that the mortgage loans are to be serviced in accordance with the servicing standard and without regard to ownership of any certificates by the master servicer or the special servicer, as applicable.

 

It is anticipated that on the closing date (i) entities managed by Ellington Management Group, LLC or an affiliate thereof will purchase approximately 75.0% of each class of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G and Class H Certificates (and may in the future purchase other classes of certificates), (ii) LNR Securities Holdings, LLC or an affiliate thereof will purchase approximately 25.0% of each class of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G and Class H Certificates (and may in the future purchase other classes of certificates), and (iii) Ellington Management Group, LLC or an affiliate thereof will be the initial controlling class representative. LNR Partners, LLC, the special servicer, assisted Ellington Management Group, LLC and LNR Securities Holdings, LLC with due diligence relating to the mortgage loans included in the mortgage pool.

 

Conflicts of Interest of the Trust Advisor

 

In acting as trust advisor, the trust advisor is required to act solely on behalf of the issuing entity, in the best interest of, and for the benefit of, all of the certificateholders (as a collective whole as if such certificateholders constituted a single lender). See “Servicing of the Mortgage Loans—The Trust Advisor” in this free writing prospectus. Although the trust advisor is required to consider the servicing standard in connection with its activities under the pooling and servicing agreement, the trust advisor will not itself be bound by the servicing standard. In acting as trust advisor, the trust advisor is acting solely as a contracting party to the extent described in this free writing prospectus and will have no fiduciary duty to any party. In addition, the trust advisor will have no obligations or responsibilities with respect to any non-serviced loan combination or the 261 Fifth Avenue mortgage loan (or any relatedpari passu companion loan or B note).

 

Notwithstanding the foregoing, the trust advisor and its affiliates may have interests that are in conflict with those of certificateholders, especially if the trust advisor or any of its affiliates holds certificates or has financial interests in or other financial dealings with any of the parties to this transaction, a borrower or a parent of a borrower. Furthermore, in the normal course of its business, Pentalpha Surveillance LLC and its affiliates have rendered services to, performed surveillance of, and negotiated with, numerous parties engaged in activities related to structured finance and commercial mortgage securitization. These parties may have included institutional investors, the depositor, the sponsors, the mortgage loan sellers, the originators, the certificate administrator, the

 

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trustee, the master servicer, the special servicer, the initial controlling class representative and/or collateral property owners or affiliates of any of those parties.

 

Additionally, Pentalpha Surveillance LLC or its affiliates may have duties with respect to existing and new commercial and multifamily mortgage loans for itself and its affiliates and for third parties, including portfolios of mortgage loans similar to the mortgage loans 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 mortgaged properties securing the mortgage loans that will be included in the issuing entity. Consequently, personnel of the trust advisor may perform services, on behalf of the issuing entity, with respect to the mortgage loans included in 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 included in the issuing entity. This may pose an inherent conflict of interest for Pentalpha Surveillance LLC.

 

The above-described relationships, to the extent they exist, may continue in the future. Each of these relationships may create a conflict of interest.

 

Conflicts of Interest of the Controlling Class Representative; Rights of the Controlling Class Representative Could Adversely Affect Your Investment

 

In connection with the servicing of the specially serviced mortgage loans, the special servicer may, at the direction of the controlling class representative (during any Subordinate Control Period and, in any event, subject to the rights of any A/B whole loan directing holder or any loan pair directing holder to the extent set forth in the related intercreditor agreement), take actions with respect to the specially serviced mortgage loans that could adversely affect the holders of some of the classes of certificates. The controlling class representative will be controlled by the controlling class certificateholders. An affiliate of the depositor may purchase less than 50% of each class of control eligible certificates upon the initial issuance thereof or thereafter;however, such affiliate will not be entitled to act as or appoint the controlling class representative, and any certificates held by such affiliate will not be considered to be outstanding for purposes of determining the identity of the controlling class representative. The controlling class representative may have interests in conflict with those of the other certificateholders. As a result, it is possible that the controlling class representative may direct the special servicer to take actions that conflict with the interests of holders 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, the REMIC provisions, the terms of the mortgage loan documents or the related intercreditor agreement. In addition, except as limited by certain conditions described under “Servicing of the Mortgage Loans—The Special Servicer” in this free writing prospectus (and other than, to the extent set forth in the related intercreditor agreement, with respect to any A/B whole loan or loan pair for so long as the related B note holder or serviced companion loan holder is the directing holder with respect to such A/B whole loan or loan pair, as applicable, and other than with respect to any non-serviced mortgage loan or excluded mortgage loan), the special servicer may be removed, with or without cause, by the controlling class representative, if any (during any Subordinate Control Period and, with respect to a removal without cause, only if (i) LNR Partners, LLC or its affiliate is no longer the special servicer or (ii) LNR Securities Holdings, LLC or its affiliate owns less than 15% of the then controlling class of certificates) or by the holders of 75% of the voting rights of the certificates (during any Collective Consultation Period and any Senior Consultation Period). See “Servicing of the Mortgage Loans—The Controlling Class Representative” and “Servicing of the Mortgage Loans—The Special Servicer” in this free writing prospectus. With respect to any non-serviced mortgage loan serviced pursuant to the pooling and servicing agreement for another securitization, similar conflicts of interest may arise with respect to the controlling class representative under such securitization. The controlling class representative under such securitization will be entitled to direct the related special servicer pursuant to provisions substantially similar to those described above.

 

In addition, if any mortgage loan becomes an “excluded controlling class mortgage loan” (i.e., a mortgage loan or loan pair with respect to which the controlling class representative or any controlling class certificateholder, as applicable, is a borrower party), the controlling class representative or any controlling class certificateholder that is a borrower party (each such party, an “excluded controlling class holder”) will not be entitled to have access to any related “excluded information”, including any asset status reports, final asset status reports or any summaries related thereto (and any other information identified in the pooling and servicing agreement), related to such excluded controlling class mortgage loan (other than such information related to such excluded controlling class mortgage

 

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loan(s) that is aggregated with information of other mortgage loans at a pool level). Although the pooling and servicing agreement will require (i) each excluded controlling class holder to certify that it acknowledges and agrees that it is prohibited from accessing and reviewing (and it agrees not to access and review) any related excluded information and (ii) the controlling class representative or any controlling class certificateholder that is not an excluded controlling class holder to certify and agree that they will not share any such excluded information with any excluded controlling class holder, (a) we cannot assure you that such excluded controlling class holders will not access, obtain, review and/or use, or the controlling class representative or any controlling class certificateholder that is not an excluded controlling class holder will not share with such excluded controlling class holder, such related excluded information in a manner that adversely impacts your certificates and (b) none of the master servicer, special servicer, trustee, the certificate administrator, the certificate registrar or any other agent will have any responsibility or liability as a result of such excluded controlling class holder obtaining access or otherwise reviewing such excluded information.

 

Each certificateholder (by its acceptance of its certificates) acknowledges and agrees that (i) the controlling class representative, the controlling class and/or the holders of the Control Eligible Certificates may each have special relationships and interests that conflict with those of holders of the other classes of certificates; (ii) the controlling class representative, the controlling class and/or the holders of the Control Eligible Certificates may act solely in the interests of the Control Eligible Classes (or any of them); (iii) the controlling class representative, the controlling class and/or the holders of the Control Eligible Certificates do not have any duties to the issuing entity or to the holders of any class of certificates; (iv) the controlling class representative, the controlling class and/or the holders of the Control Eligible Certificates may take actions that favor interests of the Control Eligible Classes (or any of them) over the interests of the holders of one or more other classes of certificates; (v) none of the controlling class representative, the controlling class and/or the holders of the Control Eligible Certificates will have any liability whatsoever to the issuing entity, the other parties to the pooling and servicing agreement, the certificateholders or any other person (including any borrower under a mortgage loan) for having acted or refrained from acting in accordance with or as permitted under the terms of the pooling and servicing agreement and this paragraph; and (vi) the certificateholders may not take any action whatsoever against the controlling class representative, the controlling class, any holder of a Control Eligible Certificate or any of the respective affiliates, directors, officers, shareholders, members, partners, agents or principals thereof as a result of the controlling class representative, the controlling class, and/or the holders of the Control Eligible Certificates, as applicable, for having acted or refrained from acting in accordance with the terms of and as permitted under the pooling and servicing agreement and this paragraph.

 

Conflicts of Interest of the Directing Holders; Rights of the Directing Holders Could Adversely Affect Your Investment

 

With respect to any A/B whole loan or loan pair, to the extent set forth in the related intercreditor agreement, a holder of a related B note or serviced companion loan will be the initial directing holder. In connection with the servicing of the mortgage loan that is part of any such A/B whole loan or loan pair, to the extent set forth in the related intercreditor agreement, such directing holder will be entitled to advise, grant or withhold approvals or direct the master servicer and the special servicer with respect to certain material servicing actions including foreclosing on and liquidating mortgaged properties. As a result, in connection with the servicing of the mortgage loan that is part of any such A/B whole loan or loan pair, the master servicer and the special servicer may, at the direction of the applicable directing holder, take actions with respect to such mortgage loan that could adversely affect the holders of some of the classes of certificates. Unless otherwise set forth in the related intercreditor agreement, any directing holder with respect to an A/B whole loan or loan pair will not have any duties to the holders of any class of certificates. As a result, it is possible that such a directing holder may direct the special servicer to take actions that conflict with the interests of holders of certain classes of the certificates. In addition, to the extent set forth in the related intercreditor agreement, the special servicer with respect to an A/B whole loan or loan pair may be removed with or without cause by the related directing holder. See “Servicing of the Mortgage Loans—The Controlling Class Representative,” “Servicing of the Mortgage Loans—The Special Servicer” and “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus.

 

You will be acknowledging and agreeing, by your purchase of offered certificates, that any directing holder for any A/B whole loan or loan pair: (i) may have special relationships and interests that conflict with those of holders of one or more classes of certificates; (ii) may act solely in its own interests, without regard to your interests;

 

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(iii) does not have any duties to any other person, including the holders of any class of certificates; (iv) may take actions that favor its interests over the interests of the holders of one or more classes of certificates; and (v) will have no liability whatsoever for having so acted and that no certificateholder may take any action whatsoever against the directing holder or any director, officer, employee, agent or principal of the directing holder for having so acted.

 

Conflicts Between Certificateholders and the Holders of Subordinate Notes or Mezzanine Notes

 

As and to the extent provided for in the related co-lender or intercreditor agreements, neither the master servicer nor special servicer may enter into material amendments, modifications or extensions of a mortgage loan without the consent of the holder of the related subordinate or mezzanine note, subject to the expiration of the subordinate or mezzanine note holder’s consent rights. The holders of the subordinate or mezzanine notes (or their respective designees) may have interests in conflict with those of the certificateholders. As a result, approvals to proposed actions of the master servicer or special servicer, as applicable, under the pooling and servicing agreement may not be granted in all instances, thereby potentially adversely affecting some of the classes of certificates.

 

Conflicts Between Borrowers and Property Managers

 

It is likely that many of the property managers of the mortgaged properties, or their affiliates, manage additional properties, including properties that may compete with the mortgaged properties. Affiliates of the managers, and managers themselves, as well as affiliates of the related borrowers, also may own other properties, including competing properties. The related borrowers and the managers of the mortgaged properties may accordingly experience conflicts of interest in ownership and/or management of such mortgaged properties.

 

Conflicts Between the Issuing Entity and the Mortgage Loan Sellers

 

The activities of the mortgage loan sellers, and their affiliates or subsidiaries, may involve properties that are in the same markets as the mortgaged properties underlying the certificates. In such case, the interests of each of the mortgage loan sellers, or their affiliates or subsidiaries, may differ from, and compete with, the interests of the issuing entity, and decisions made with respect to those assets may adversely affect the amount and timing of distributions with respect to the certificates. Conflicts of interest may also arise between the issuing entity and each of the mortgage loan sellers, or their affiliates or subsidiaries, that engage in the acquisition, development, operation, leasing, financing and disposition of real estate if those mortgage loan sellers acquire any certificates. In particular, if certificates held by a mortgage loan seller are part of a class that is or becomes the controlling class, the mortgage loan seller as part of the holders of the controlling class would have the ability to influence certain actions of the special servicer under circumstances where the interests of the issuing entity conflict with the interests of the mortgage loan seller, or its affiliates or subsidiaries, as acquirors, developers, operators, tenants, financers or sellers of real estate related assets.

 

In addition, any subordinate orpari passu indebtedness secured by the related mortgaged property, and any existing and/or future mezzanine loans related to certain of the mortgage loans, may be held by the respective sellers of the affected mortgage loans or affiliates or subsidiaries thereof. The holders of any such indebtedness or mezzanine loans may have interests that conflict with the interests of the holders of the certificates. For example, Bank of America, National Association, a mortgage loan seller, an originator, a sponsor, the initial holder of the 261 Fifth Avenue pari passucompanion loan and the parent of the Depositor, is also an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated, an underwriter. In addition, UBS Real Estate Securities Inc., a mortgage loan seller, an originator, a sponsor and the initial holder of the Charles River Plaza Northpari passu companion loan designated Note A-3-2 and the WPC Department Store Portfoliopari passu companion loan designated Note A-1, is an affiliate of UBS Securities LLC, one of the underwriters.

 

Additionally, certain of the mortgage loans included in the issuing entity may have been refinancings of debt previously held by a mortgage loan seller, or an affiliate or subsidiary of a mortgage loan seller, and the mortgage loan sellers, or their affiliates or subsidiaries, may have or have had equity investments in the borrowers (or in the owners of the borrowers) or properties under certain of the mortgage loans included in the issuing entity. Each of the mortgage loan sellers, and their affiliates or subsidiaries, have made and/or may make or have preferential rights to make loans to, or equity investments in, affiliates of the borrowers under the mortgage loans.

 

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The mortgage loan sellers, the sponsors and their respective affiliates expect to derive ancillary benefits from this offering, and their respective incentives may not be aligned with those of purchasers of the certificates. In particular, the mortgage loan sellers, the sponsors and their respective affiliates expect to receive compensation, commissions, payments, rebates, remuneration and business opportunities, in connection with or as a result of this offering of certificates and, accordingly, such parties may record a profit, in an amount based on, among other things, the amount of proceeds (net of transaction expenses) received from the sale of the certificates to investors relative to their investment in the mortgage loans. The benefits to the mortgage loan sellers, the sponsors and their affiliates arising from the decision to securitize the mortgage loans may be greater than they would have been had other mortgage loans been selected.

 

In addition, the mortgage loan sellers originated or purchased the mortgage loans in order to securitize them by means of a transaction such as the offering of the certificates. A completed sale of the certificates to third parties would reduce the mortgage loan sellers’ and their respective affiliates’ exposure to the risk of ownership of the mortgage loans, and would effectively transfer such risk of ownership to the purchasers of the certificates.

 

Furthermore, the mortgage loan sellers and their affiliates may benefit from a completed sale of the certificates because the sale would establish a market precedent and a valuation data point for securities similar to the certificates, thus enhancing the ability of the mortgage loan sellers and their respective affiliates to conduct similar offerings in the future and permitting them to write up, avoid writing down or otherwise adjust the fair value of similar assets or securities held on their balance sheet.

 

Conflicts of Interest of the Underwriters and Their Affiliates

 

The activities of the underwriters and their respective affiliates (collectively referred to as the Underwriter Entities) may result in certain conflicts of interest. The Underwriter Entities may retain, or own in the future, classes of certificates, and any voting rights of that class could be exercised by them in a manner that could adversely impact the certificates. If an Underwriter Entity becomes a holder of any of the certificates, through market-making activity or otherwise, any actions that it takes in its capacity as certificateholder, including voting, providing consents or otherwise, will not necessarily be aligned with the interests of other holders of the same class or other classes of the certificates. To the extent an Underwriter Entity makes a market in the certificates (which it is under no obligation to do), it would expect to receive income from the spreads between its bid and offer prices for the certificates. The price at which an Underwriter Entity may be willing to purchase certificates, if it makes a market, will depend on market conditions and other relevant factors and may be significantly lower than the issue price for the certificates and significantly lower than the price at which it may be willing to sell the certificates.

 

Certain activities and interests of the Underwriter Entities will not align with, and may in fact be directly contrary to, those of the certificateholders. The Underwriter Entities are part of global investment banking, securities and investment management firms that provide a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. As such, the Underwriter Entities actively make markets in and trade financial instruments for their own account and for the accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. The Underwriter Entities’ activities include, among other things, executing large block trades and taking long and short positions directly and indirectly, through derivative instruments or otherwise. The securities and instruments in which the Underwriter Entities take positions, or expect to take positions, include loans similar to the mortgage loans, securities and instruments similar to the certificates and other securities and instruments. Market making is an activity where the Underwriter Entities buy and sell on behalf of customers, or for their own account, to satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. As a result, you should expect that the Underwriter Entities will take positions that are inconsistent with, or adverse to, the investment objectives of investors in the certificates.

 

As a result of the Underwriter Entities’ various financial market activities, including acting as a research provider, investment advisor, market maker or principal investor, you should expect that personnel in various businesses throughout the Underwriter Entities will have and express research or investment views and make recommendations that are inconsistent with, or adverse to, the objectives of investors in the certificates.

 

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The Underwriter Entities and their respective 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 certificates or credit derivative or other derivative transactions with other parties pursuant to which they sell or buy credit protection with respect to one or more of the certificates, and do so without consideration of the fact that the underwriters acted as underwriters for the certificates. Such transactions may result in Underwriter Entities and/or their clients having long or short positions in such instruments. Any short positions will increase in value if the related securities or other instruments decrease in value. In conducting such activities, none of the Underwriter Entities has any obligation to take into account the interests of the certificateholders or holders of B notes or serviced companion loans or any possible effect that such activities could have on them. The Underwriter Entities and their respective 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 certificates or the certificateholders or holders of B notes or serviced companion loans.

 

The Underwriter Entities expect that a completed offering will enhance their ability to assist clients and counterparties in the transaction contemplated by this free writing prospectus or in related transactions (including assisting clients in further purchases and sales of the certificates and hedging transactions). The Underwriter Entities expect to derive fees and other revenues from these transactions. In addition, participating in a successful offering and providing related services to clients may enhance the Underwriter Entities’ relationships with various parties, facilitate additional business development and enable them to obtain additional business and generate additional revenue.

 

In addition, the Underwriter Entities will have no obligation to monitor the performance of the certificates or the actions of the master servicer, the special servicer, the certificate administrator, the custodian, the trust advisor or the trustee and will have no authority to advise the master servicer, the special servicer, the certificate administrator, the custodian, the trust advisor or the trustee or to direct their actions.

 

Furthermore, the Underwriter Entities may have ongoing relationships with, render services to, and engage in transactions with the borrowers, the mortgage loan sellers or sponsors and their respective affiliates, which relationships and transactions may create conflicts of interest between the Underwriter Entities, on the one hand, and the issuing entity, on the other hand.

 

Merrill Lynch, Pierce, Fenner & Smith Incorporated, one of the underwriters, is an affiliate of Bank of America, National Association, a mortgage loan seller, an originator, a sponsor, the initial holder of the 261 Fifth Avenue pari passucompanion loan and the parent of the Depositor. In addition, UBS Securities LLC, one of the underwriters, is an affiliate of UBS Real Estate Securities Inc., a mortgage loan seller, an originator, a sponsor and the initial holder of the Charles River Plaza Northpari passu companion loan designated Note A-3-2 and the WPC Department Store Portfoliopari passu companion loan designated Note A-1.

 

Conflicts in the Selection of the Underlying Mortgage Loans

 

The anticipated initial investors in the Control Eligible Certificates were given the opportunity by the mortgage loan sellers to perform due diligence on the mortgage loans originally identified by the mortgage loan sellers for inclusion in the issuing entity, and may have been given the opportunity to request the removal or re-sizing of, or the modification of the expected repayment dates or other features of, some or all of the mortgage loans. The mortgage pool as originally proposed by the mortgage loan sellers may have been adjusted based on some of these requests, if any were made. In addition, the anticipated initial investors may have requested and received price adjustments or cost mitigation arrangements in connection with accepting certain mortgage loans included in the mortgage pool, which price adjustments or cost mitigation arrangements may have been effected through a payment by the related mortgage loan seller to the anticipated initial investors out of the proceeds received by the related mortgage loan seller in connection with this securitization.

 

We cannot assure you that you or another investor would make the same requests to modify the original pool as the anticipated initial investors or that the final pool if influenced by the anticipated initial investors’ feedback would not adversely affect the performance of your certificates and benefit the performance of the anticipated initial investors’ certificates. Because of the differing subordination levels, the anticipated initial investors have interests that may, in some circumstances, differ from those of purchasers of other classes of certificates, and may desire a

 

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portfolio composition that benefits the anticipated initial investors but that does not benefit other investors. In addition, any of the anticipated initial investors may enter into hedging or other transactions or otherwise have business objectives that also could cause their interests with respect to the mortgage pool to diverge from those of other purchasers of the certificates. The anticipated initial investors performed due diligence solely for their own benefit and have no liability to any person or entity for conducting its due diligence. None of the anticipated initial investors is 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 mortgage loan sellers as to the selection of the mortgage loans and the establishment of other transaction terms. Investors are not entitled to rely in any way on the anticipated initial investors’ acceptance of a mortgage loan. The anticipated initial investors’ 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.

 

One of the anticipated initial investors in the Control Eligible Certificates or its designee is expected to constitute the initial controlling class representative. The controlling class representative will have certain approval rights and rights to direct and consult with the special servicer as described under “Servicing of the Mortgage Loans—The Controlling Class Representative” in this free writing prospectus.

 

Because the incentives and actions of the anticipated initial investors 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 free writing prospectus and your own view of the mortgage pool.

 

Conflicts May Occur as a Result of the Rights of Third Parties To Terminate the Special Servicer of an A/B Whole Loan, Loan Pair or Non-Serviced Loan Combination

 

With respect to an A/B whole loan, loan pair or non-serviced loan combination, to the extent set forth in the related intercreditor agreement, the holder of the related B note, serviced companion loan or non-serviced companion loan will be entitled, under certain circumstances, to remove the related special servicer for the related A/B whole loan, loan pair or non-serviced loan combination under the pooling and servicing agreement pursuant to which such A/B whole loan, loan pair or non-serviced loan combination is being serviced and appoint a successor special servicer for the such A/B whole loan, loan pair or non-serviced loan combination. The party with this appointment power may have special relationships or interests that conflict with those of the holders of one or more classes of certificates. In addition, that party does not have any duties to the holders of any class of certificates, may act solely in its own interests, and will have no liability to any certificateholders for having done so. No certificateholder may take any action against the majority certificateholder of the controlling class under any such pooling and servicing agreement, the holder of the related B note, serviced companion loan, non-serviced companion loan or other parties for having acted solely in their respective interests. See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans” and “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” and “—The Non-Serviced Loan Combinations” in this free writing prospectus for a description of these rights to terminate a special servicer.

 

Conflicts Between Certificateholders and Holders of Companion Loans or B Notes

 

The interests of the holder of any related serviced companion loan, non-serviced companion loan or B note (or its designee) entitled to exercise various rights with respect to the servicing of a mortgage loan and the related serviced companion loan, non-serviced companion loan or B note, as applicable, may conflict with the interests of, and its decisions may adversely affect, the holders of one or more classes of offered certificates. In particular, Bank of America, National Association is the initial holder of the 261 Fifth Avenuepari passu companion loan and the initial loan-specific directing holder with respect to the 261 Fifth Avenue loan pair. In addition, UBS Real Estate Securities Inc. is the initial holder of the Charles River Plaza Northpari passu companion loan designated Note A-3-2 and the WPC Department Store Portfoliopari passu companion loan designated Note A-1. No certificateholder may take any action against any holder of a serviced companion loan, non-serviced companion loan or B note (or its designee) for having acted solely in its respective interest.

 

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See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus. See also “Risks Related to the Offered Certificates—You Will Have No Control Over the Servicing of the Non-Serviced Pari Passu Mortgage Loans” below for a discussion of the rights of certificateholders with respect to non-serviced mortgage loans.

 

Other Conflicts

 

The special servicer (or any prospective replacement special servicer) may enter into one or more arrangements with the controlling class representative, a controlling class certificateholder, a B note holder, a serviced companion loan holder and/or other persons or certificateholders who have the right to remove the special servicer (but may not enter into such arrangements with the trust advisor or any affiliate thereof), to provide for a discount and/or revenue sharing with respect to certain special servicer compensation in consideration of or as a condition of, among other things, the special servicer’s appointment or replacement as special servicer under the pooling and servicing agreement and, with respect to any A/B whole loan or loan pair, under the related intercreditor agreement. Any such party may further consider any such economic arrangements with the special servicer or a prospective replacement special servicer in entering into any decision to appoint or replace such party from time to time, and such considerations would not be required to take into account the best interests of the certificateholders or any group of certificateholders. A primary servicer or the master servicer may enter into an agreement with a mortgage loan seller or sponsor to purchase the servicing rights to related mortgage loans and/or the right to be appointed as the primary servicer or master servicer with respect to such mortgage loans. A mortgage loan seller, sponsor or directing holder may consider the economic arrangement with the servicer in entering into any decision to appoint such servicer from time to time, and such consideration would not be required to take into account the best interests of the certificateholders or any group of certificateholders.

 

LNR Partners, LLC, which is expected to act as the initial special servicer, is an affiliate of LNR Securities Holdings, LLC (or its affiliate), which is expected to purchase approximately 25.0% of each class of the Class X-E, Class X-FG, Class X-NR, Class E, Class F, Class G and Class H Certificates (and may in the future purchase other classes of certificates).

 

An affiliate of LNR Partners, LLC, the special servicer currently has an equity interest in the borrower under the mortgage loan secured by the mortgaged property identified on APPENDIX I to this free writing prospectus as Aviare Place Apartments, representing approximately 0.7% of the initial pool balance, which is currently serviced as an excluded mortgage loan pursuant to the pooling and servicing agreement for the MSBAM 2015-C23 securitization.

 

Risks Related to the Offered Certificates

 

Subordination of Some Certificates May Affect the Timing of Payments and the Application of Losses on Your Certificates

 

As described in this free writing prospectus, the rights of the holders of each class of subordinate certificates to receive payments of principal and interest otherwise payable on their certificates will be subordinated to such rights of the holders of the more senior certificates having an earlier alphabetical or alphanumeric class designation. Losses (other than losses attributable to trust advisor expenses) on the mortgage loans will be allocated to the Class H, Class G, Class F, Class E, Class D, Class C, Class B and Class A-S Certificates, in that order, reducing amounts otherwise payable to each such class. Any remaining losses would then be allocated or cause shortfalls to the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates,pro rata, and, solely with respect to losses of interest, to the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR, in proportion to the amounts of interest distributable on or the principal balances of, as applicable, those certificates. Notwithstanding that the notional amounts of the Class X Certificates (other than the Class X-A Certificates) are comprised of the certificate principal balances of one or more classes of subordinate principal balance certificates and/or subordinate trust components, interest distributions on such Class X Certificates are nevertheless paidpro rata with interest distributions on the senior certificates In addition, notwithstanding the foregoing, losses attributable to trust advisor expenses will not be allocated to the Control Eligible Certificates.

 

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Certain Federal Income Tax Considerations Regarding Original Issue Discount

 

Certain classes of certificates may be issued with “original issue discount” for federal income tax purposes. Original issue discount is taxable when it accrues rather than when it is received, resulting in the recognition of original issue discount as taxable income before any cash attributable to that taxable income is received. Investors must have sufficient sources of cash other than a certificate to pay any federal, state or local income taxes that may be imposed on original issue discount. See “Material Federal Income Tax Consequences—Taxation of the Offered Certificates—Original Issue Discount” in this free writing prospectus.

 

Mortgage Loan Sellers May Not Make a Required Repurchase or Substitution of a Defective Mortgage Loan

 

In limited circumstances, the related mortgage loan seller may be obligated to repurchase or replace a mortgage loan that it sold to us if the applicable mortgage loan seller’s representations and warranties concerning that mortgage loan are materially breached or if there are material defects in the documentation for that mortgage loan. Each mortgage loan seller is the sole warranting party in respect of the mortgage loans sold by such mortgage loan seller to us. There can be no assurance that any of these entities (including any guarantor of a mortgage loan seller’s repurchase and substitution obligations) will effect a repurchase or substitution and neither we nor any of our affiliates are obligated to repurchase or substitute any mortgage loan in connection with either a material breach of any mortgage loan seller’s representations and warranties or any material document defects, if such mortgage loan seller defaults on its obligation to do so. In addition, the mortgage loan sellers (and any guarantor of a mortgage loan seller’s repurchase or substitution obligations) may have various legal defenses available to them in connection with a repurchase or substitution obligation. The representations and warranties address the characteristics of the mortgage loans and mortgaged properties as of the date of issuance of the certificates. They do not relieve you or the issuing entity of the risk of defaults and losses on the mortgage loans. If any mortgage loan seller fails to fulfill such obligation, then you could experience cash flow disruptions or losses on your certificates. In addition, any mortgage loan that is not repurchased or substituted and that is not a “qualified mortgage” for a REMIC may cause the issuing entity to fail to qualify as one or more REMICs or cause the issuing entity to incur a tax. See “Description of the Mortgage Pool—Representations and Warranties” and “—Repurchases and Other Remedies” in this free writing prospectus.

 

Your Lack of Control Over the Issuing Entity Can Create Risks

 

Except as described below, you and other certificateholders generally do not have a right to vote and do not have the right to make decisions with respect to the administration of the issuing entity. See “Servicing of the Mortgage Loans—General” in this free writing prospectus. Those decisions are generally made, subject to the express terms of the pooling and servicing agreement, by the master servicer, the special servicer, the trustee, the custodian or the certificate administrator, as applicable. Any decision made by one of those parties in respect of the issuing entity, even if that decision is determined to be in your best interests by that party, may be contrary to the decision that you or other certificateholders would have made and may negatively affect your interests.

 

During any Subordinate Control Period, the controlling class representative, if any, will have the right to replace the special servicer (other than with respect to a non-serviced loan combination) (a) for cause at any time and (b) without cause if (i) LNR Partners, LLC or its affiliate is no longer the special servicer or (ii) LNR Securities Holdings, LLC or its affiliate owns less than 15% of the then controlling class of certificates. During any Collective Consultation Period and any Senior Consultation Period, the holders of at least 25% of the voting rights of the certificates may request a vote to replace the special servicer (other than with respect to a non-serviced loan combination). The subsequent vote may result in the termination and replacement of the special servicer if within one hundred eighty (180) days of the initial request for that vote the holders of at least 75% of the voting rights of the certificates, vote affirmatively to so replace. Notwithstanding the foregoing, in the case of an A/B whole loan or loan pair, for so long as the holder of the related B note or serviced companion loan is the directing holder with respect to such A/B whole loan or loan pair, and to the extent set forth in the related intercreditor agreement, only the holder of such B note or serviced companion loan, as applicable, may replace the special servicer for such A/B whole loan or loan pair, as applicable, without cause.

 

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See “Servicing of the Mortgage Loans—The Controlling Class Representative,” “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans” and “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus.

 

In addition, although there is a trust advisor with certain obligations in respect of reviewing the compliance of the special servicer with certain of its obligations under the pooling and servicing agreement, the trust advisor (i) has no control rights over actions by the special servicer in respect of the mortgage loans at any time, (ii) has no consultation rights over actions by the special servicer in respect of the mortgage loans during any Subordinate Control Period, (iii) has no ability to communicate with or directly influence the actions of borrowers at any time, and (iv) has no consultation rights over actions by the related special servicer in respect of any non-serviced loan combination at any time. In addition, the trust advisor only has the limited obligations and duties set forth in the pooling and servicing agreement, and has no fiduciary duty to act on behalf of the certificateholders or the issuing entity or in the best interest of any particular certificateholder. It is not intended that the trust advisor act as a surrogate for the certificateholders. You should not rely on the trust advisor to affect the special servicer’s actions under the pooling and servicing agreement or to monitor the actions of the controlling class representative or special servicer, other than to the limited extent specifically required in respect of certain actions of the special servicer at certain prescribed times under the pooling and servicing agreement.

 

Furthermore, each non-serviced mortgage loan (including the 261 Fifth Avenue mortgage loan following the securitization of the relatedpari passu companion loan) will be serviced pursuant to a separate pooling and servicing agreement and certificateholders will generally have no right to make, or consult in respect of, decisions with respect to the administration of such non-serviced mortgage loan (including the decision as to who will service or special service that mortgage loan);however, the issuing entity will be entitled to exercise all rights of the non-controlling note holder to the extent set forth in the related intercreditor agreement. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations.”

 

In certain limited circumstances, certificateholders have the right to vote on matters affecting the issuing entity. In some cases these votes are by certificateholders taken as a whole and in others the vote is by class. In all cases voting is based on the outstanding certificate principal balance, which is reduced by realized losses. In certain cases with respect to the termination of the special servicer and the trust advisor only, certain voting rights will also be reduced by appraisal reductions. These limitations on voting could adversely affect your ability to protect your interests with respect to matters voted on by certificateholders. See “Servicing of the Mortgage Loans—The Controlling Class Representative” in this free writing prospectus.

 

Rights of the Trust Advisor, the Controlling Class Representative and Any Directing Holder Could Adversely Affect Your Investment

 

During any Subordinate Control Period, in connection with certain material servicing actions with respect to the mortgage loans (other than with respect to any non-serviced mortgage loan or with respect to any A/B whole loan or loan pair (to the extent set forth in the related intercreditor agreement and for so long as the holder of the related B note or serviced companion loan is the directing holder with respect to such A/B whole loan or loan pair)), the special servicer generally will be required to obtain the consent of the controlling class representative. During any Collective Consultation Period and any Senior Consultation Period, the special servicer generally will be required to consult the trust advisor and, only during any Collective Consultation Period, the controlling class representative, in each case on a non-binding basis, in connection with certain material decisions with respect to the mortgage loans (other than with respect to any non-serviced mortgage loan or with respect to any A/B whole loan or loan pair (to the extent set forth in the related intercreditor agreement)). These actions and decisions include, among others, certain modifications to the mortgage loans, including modifications of monetary terms, foreclosure or comparable conversion of the related mortgaged properties, and certain sales of the mortgage loans or REO properties for less than the outstanding principal amount plus accrued interest, fees and expenses. See “Servicing of the Mortgage Loans—The Controlling Class Representative” and “—The Trust Advisor” in this free writing prospectus for a list of actions and decisions requiring consultation with the trust advisor and consultation with or the consent of the controlling class representative. As a result of these obligations, the special servicer may take actions with respect to a mortgage loan that could adversely affect the interests of investors in one or more classes of certificates.

 

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See “Risk Factors—Risks Related to Conflicts of Interest—Conflicts of Interest of the Trust Advisor” and “—Conflicts of Interest of the Controlling Class Representative; Rights of the Controlling Class Representative Could Adversely Affect Your Investment” for a discussion of certain conflicts of interest of the controlling class representative and the trust advisor.

 

Reimbursement of Trust Advisor Expenses Could Reduce Payments on the Class A-1, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D Certificates

 

As described elsewhere in this free writing prospectus, in general, unless your certificates are Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, your right to receive distributions of amounts collected or advanced on or in respect of the mortgage loans will generally be subordinated to those of the holders of the certificates with a more senior payment priority (as described under “Description of the Certificates—Distributions—Application of the Available Distribution Amount” in this free writing prospectus) than your class. However, the Control Eligible Certificates will not provide subordination to the more senior classes of certificates in the event of losses incurred by the issuing entity due to reimbursement of trust advisor expenses (other than the trust advisor fee). Therefore, amounts that might otherwise be distributable in respect of the Class A-1, Class A-SB, Class A-3, Class A-4, Class A-S, Class B, Class C and Class D Certificates may be used to reimburse trust advisor expenses in full without any corresponding reduction to amounts payable to the Control Eligible Certificates. See “—Subordination of Some Certificates May Affect the Timing of Payments and the Application of Losses on Your Certificates,” “Description of Certificates—Distributions—Allocation of Trust Advisor Expenses,” “Description of the Offered Certificates—Distributions—Application of the Available Distribution Amount” and “Description of the Offered Certificates—Distributions—Subordination; Allocation of Collateral Support Deficit” in this free writing prospectus.

 

The Yield on Your Certificates Will Be Affected By the Price at Which the Certificates Were Purchased and the Rate, Timing and Amount of Distributions on Your Certificates

 

The yield on any certificate will depend on (1) the price at which such certificate is purchased by you and (2) the rate, timing and amount of distributions on your certificate. The rate, timing and amount of distributions on any certificate will, in turn, depend on, among other things:

 

·the interest rate for such certificate;

 

·the rate and timing of principal payments (including principal prepayments) and other principal collections (including loan purchases in connection with breaches of representations and warranties or in connection with an optional termination of the issuing entity) on or in respect of the mortgage loans and the extent to which such amounts are to be applied or otherwise result in a reduction of the certificate principal balance or notional amount of such certificate;

 

·the rate, timing and severity of losses on or in respect of the mortgage loans or unanticipated expenses of the issuing entity;

 

·the rate and timing of any reimbursement of the master servicer, the special servicer or the trustee, as applicable, out of the collection account of nonrecoverable advances or advances remaining unreimbursed on a modified mortgage loan on the date of such modification;

 

·the timing and severity of any interest shortfalls resulting from prepayments to the extent not offset by a reduction in master servicer compensation as described in this free writing prospectus;

 

·the timing and severity of any reductions in the appraised value of any mortgaged property in a manner that has an effect on the amount of advancing required on the related mortgage loan; and

 

·the method of calculation of prepayment premiums and yield maintenance charges and the extent to which prepayment premiums and yield maintenance charges are collected and, in turn, distributed on such certificate.

 

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For this purpose, principal payments include both voluntary prepayments, if permitted, and involuntary prepayments, such as prepayments resulting from casualty or condemnation of mortgaged properties, defaults and liquidations by borrowers, or repurchases as a result of a mortgage loan seller’s material breach of representations and warranties or material defects in a mortgage loan’s documentation, or purchases by a mezzanine holder, a B note holder or a companion loan holder pursuant to a purchase option. In addition, certain of the mortgage loans may require that, upon the occurrence of certain events, funds held in escrow or proceeds from letters of credit are applied to the outstanding principal balance of such mortgage loans.

 

The yield on each class of certificates with a pass-through rate limited by, equal to or based on the weighted average net interest rate of the pool of mortgage loans could (and in the case of each class of certificates with a pass-through rate equal to or based on the weighted average net interest rate of the pool of mortgage loans, would) be adversely affected if mortgage loans with higher interest rates pay faster than the mortgage loans with lower interest rates. Such pass-through rates may be adversely affected as a result of a decrease in the weighted average of the net interest rates on the mortgage loans even if principal prepayments do not occur. In addition, because some mortgage loans will amortize their principal more quickly than others, any such pass-through rate may fluctuate over the life of your certificates. See “Yield, Prepayment and Maturity Considerations” in this free writing prospectus.

 

None of the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG nor Class X-NR will be entitled to distributions of principal but instead will accrue interest on their related Notional Amount. Because the Notional Amount of the Class X-A Certificates is based upon the outstanding Certificate Principal Balances of the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates, the Notional Amount of the Class X-B Certificates is based upon the outstanding Certificate Principal Balance of the Class A-S Certificate, the Notional Amount of the Class X-D Certificates is based upon the outstanding Certificate Principal Balance of the Class D Certificate, the Notional Amount of the Class X-E Certificates is based upon the outstanding Certificate Principal Balance of the Class E Certificate, the Class X-FG Certificates is based upon the outstanding Certificate Principal Balances of the Class F and Class G Certificates and the Notional Amount of the Class X-NR Certificates is based upon the outstanding Certificate Principal Balance of the Class H Certificate, the yield to maturity on the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates will be extremely sensitive to the rate and timing of prepayments of principal, liquidations and principal losses on the mortgage loans to the extent allocated to the classes of principal balance certificates whose Certificate Principal Balances comprise the related Notional Amount. A rapid rate of principal prepayments, liquidations and/or principal losses on the mortgage loans could result in the failure to recoup the initial investment in the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates.

 

The investment performance of your certificates may vary materially and adversely from your expectations if the actual rate of prepayment on the mortgage loans is higher or lower than you anticipate. In general, if you buy an offered certificate at a premium, and principal distributions occur faster than expected, your actual yield to maturity will be lower than expected. If the rate of principal prepayments on the mortgage loans is very high, holders of certificates purchased at a premium might experience yields that are lower, and potentially substantially lower, than anticipated. Conversely, if you buy an offered certificate at a discount and principal distributions occur more slowly than expected, your actual yield to maturity will be lower than expected. See “Yield, Prepayment and Maturity Considerations” in this free writing prospectus.

 

Any changes in the weighted average lives of your certificates may adversely affect your yield. Prepayments resulting in a shortening of weighted average lives of your certificates may be made at a time of low interest rates when you may be unable to reinvest any resulting payment of principal on your certificates at a rate comparable to the effective yield anticipated by you in making your investment in the certificates. Conversely, delays and extensions resulting in a lengthening of those weighted average lives may occur at a time of high interest rates when you may have been able to reinvest principal payments that would otherwise have been received by you at higher rates. See “Yield, Prepayment and Maturity Considerations” in this free writing prospectus.

 

The extent to which prepayments on the mortgage loans in the issuing entity ultimately affect the weighted average life of the certificates with certificate principal balances will depend on the terms of the certificates, and more particularly the order in which principal payments are made on the respective classes of certificates with certificate principal balances.

 

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Reimbursements to the master servicer, the special servicer or the trustee for nonrecoverable advances or workout delayed reimbursement amounts, or to the trust advisor for certain expenses in accordance with the pooling and servicing agreement, may reduce the amount of principal available to be distributed on your certificates and could extend the weighted average life of your certificates. See “Description of the Offered Certificates—Distributions” in this free writing prospectus.

 

Voluntary prepayments under some of the mortgage loans are prohibited for specified lock-out periods or, if permitted, generally require the payment of a prepayment premium or a yield maintenance charge or both, unless the prepayment occurs within a specified period prior to and including the anticipated repayment date or maturity date, as the case may be. Nevertheless, we cannot assure you that the related borrowers will refrain from prepaying their mortgage loans due to the existence of a prepayment premium or a yield maintenance charge or that the amount of such premium or charge will be sufficient to compensate you for shortfalls in payments on your certificates on account of such prepayments. We also cannot assure you that involuntary prepayments will not occur or that borrowers will not default in order to avoid the application of lock-out periods. The rate at which voluntary prepayments occur on the mortgage loans will be affected by a variety of factors, including:

 

·the terms of the mortgage loans;

 

·the length of any prepayment lock-out period;

 

·the level of prevailing interest rates;

 

·the availability of mortgage credit;

 

·the applicable yield maintenance charges or prepayment premiums and the ability of the master servicer or special servicer to enforce the related provisions;

 

·the failure to meet certain requirements for the release of escrows/reserves that result in a prepayment;

 

·the occurrence of casualties or natural disasters; and

 

·economic, demographic, tax, legal or other factors.

 

Variability in the Amounts and Enforcement of Yield Maintenance Charges and Prepayment Premiums May Affect the Yield to Maturity on Your Certificates. Generally, no yield maintenance charge or prepayment premium will be required for prepayments (i) in connection with a casualty or condemnation unless an event of default has occurred and is continuing or (ii) in connection with the resolution of a specially serviced mortgage loan. In addition, certain mortgage loans may allow for all or a portion of the outstanding principal amount to be prepaid, without any prepayment premium or yield maintenance charge, if any insurance proceeds or condemnation awards are applied against the outstanding principal amount of the loan. In addition, if a mortgage loan seller repurchases any mortgage loan from the issuing entity due to the material breach of a representation or warranty or a material document defect or the mortgage loan is otherwise purchased from the issuing entity, the repurchase price paid will be passed through to the holders of the certificates with the same effect as if the mortgage loan had been prepaid in part or in full, except that no yield maintenance charge or prepayment premium will be payable. Further, the holder of the related B note or serviced companion loan in an A/B whole loan or loan pair may or, in the case of a mortgage loan with a corresponding mezzanine loan, the related mezzanine lender may, have the option to purchase the related mortgage loan after certain defaults, and the purchase price may not include any yield maintenance payments or premium charges. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” and “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Subordinate and Other Financing” in this free writing prospectus. Any such repurchase or purchase may, therefore, adversely affect the yield to maturity on your certificates.

 

Although all of the mortgage loans have protection against voluntary prepayments in the form of lock-out periods, defeasance provisions, yield maintenance provisions and/or prepayment premium provisions, there can be no assurance that (i) borrowers will refrain from prepaying mortgage loans due to the existence of a yield maintenance charge or prepayment premium; (ii) involuntary prepayments or repurchases will not occur; or

 

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(iii) partial prepayments will not occur in the case of those loans that permit such prepayment without a yield maintenance charge or prepayment premium.

 

Provisions prohibiting prepayment during a lock-out period or requiring the payment of prepayment premiums or yield maintenance charges may not be enforceable, or may be deemed usurious, in some states and under federal bankruptcy law, regardless of whether the prepayment is voluntary or involuntary. We cannot assure you that foreclosure proceeds will be sufficient to pay an enforceable prepayment premium or yield maintenance charge. Additionally, although the collateral substitution provisions related to defeasance do not have the same effect on the certificateholders as prepayment, we cannot assure you that a court would not interpret those provisions as requiring a yield maintenance charge and therefore unenforceable under applicable law or public policy or usurious.

 

In addition, the yield maintenance formulas are not the same for all of the mortgage loans that have yield maintenance charges. This can lead to substantial variance from loan to loan with respect to the amount of yield maintenance charge that is due on the related prepayment. Also, the description in the mortgage notes of the method of calculation of prepayment premiums and yield maintenance charges is complex and subject to legal interpretation and it is possible that another person would interpret the methodology differently from the way we did in estimating an assumed yield to maturity on your certificates as described in this free writing prospectus.

 

See APPENDIX I to this free writing prospectus for a description of the various prepayment provisions.

 

Losses on the Mortgage Loans; Variability of Yield

 

The yield to maturity on the offered certificates will be sensitive in varying degrees (with the Class D Certificates being the most sensitive with respect to the offered certificates) to the default and loss experience on or in respect of the mortgage loans and to the timing of any such defaults or losses (including collateral support deficits). The rights of the holders of any class of offered certificates, other than the Class A-1, Class A-SB, Class A-3, Class A-4 and Class X-A Certificates, to receive distributions in respect of the mortgage loans will generally be subordinate to the rights of the holders of the Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates and various classes of offered certificates as described under “Description of the Certificates—Distributions—Application of the Available Distribution Amount” in this free writing prospectus. See “—Subordination of Some Certificates May Affect the Timing of Payments and the Application of Losses on Your Certificates” above. The Class V and Class R Certificates do not have certificate principal balances and do not provide any material protection to the holders of the other certificates against losses and other shortfalls in collections on the mortgage loans. Investors in the offered certificates should consider the risk that losses on or in respect of the mortgage loans could result in the failure of such investors to fully recover their initial investments.

 

The yield to maturity on the offered certificates will also be affected by the rate and timing of principal payments (including by reason of principal prepayments, defaults and liquidations) on or in respect of the mortgage loans and the application of such payments to reduce the certificate principal balances or notional amounts of such certificates. The yield to maturity on the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates will be highly sensitive to the rate and timing of principal payments (including by reason of prepayments, defaults and liquidations) on or in respect of the mortgage loans, and investors in the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates should fully consider the associated risks, including the risk that an extremely rapid rate of amortization and prepayment of the mortgage loans (and correspondingly, of the aggregate notional amount of their certificates) could result in the failure of such investors to recoup their initial investment. As described herein, distributions of principal generally will not be made on any class of subordinate certificates until the aggregate certificate principal balance of each class of certificates, if any, with an earlier alphabetical class designation is reduced to zero (subject to the Class A-S Certificates being subordinate to the Class A-1, Class A-SB, Class A-3, Class A-4, Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR). For instance, distributions of principal will not be made on the Class D Certificates until the aggregate certificate principal balance of the Class C Certificates is reduced to zero. The allocation to the Class A-1, Class A-SB, Class A-3 and Class A-4 Certificates for so long as they are outstanding, of all principal payments on or in respect of the mortgage pool will have the effect of accelerating the amortization of such certificates relative to the actual amortization of the mortgage pool, while increasing (in the absence of losses on the mortgage loans) the proportionate interest evidenced by the subordinate certificates in the mortgage pool, which is intended to preserve the availability of the subordination provided by such subordinate certificates to such

 

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certificates and will cause the certificate principal balances of such subordinate certificates to decline more slowly than would be the case if holders of such subordinate certificates received their proportionate share of principal payments on or in respect of the mortgage pool. As a result, the weighted average lives of such subordinate certificates will likely be longer than otherwise would be the case, and the performance characteristics of such subordinate certificates will be different from other mortgage pass-through certificates that do not disproportionately allocate principal payments on or in respect of the underlying mortgage assets according to the certificate class. With respect to each class of offered certificates (other than the Class A-1, Class A-SB, Class A-3, Class A-4 and Class X-A Certificates) being offered at a discount from its aggregate certificate principal balance, prospective investors should strongly consider the effects of the foregoing on their anticipated yields to maturity.

 

For an additional discussion of factors affecting the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates, see “Yield, Prepayment and Maturity Considerations—Yield on the Class X-A, Class X-B, Class X-D, Class X-E, Class X-FG and Class X-NR Certificates” herein. For an additional discussion of factors affecting yield, see “Yield, Prepayment and Maturity Considerations” herein and “Yield and Maturity Considerations” in the attached prospectus.

 

Release of Collateral May Reduce the Yield on Your Certificates

 

Notwithstanding the prepayment provisions described in this free writing prospectus, certain of the mortgage loans permit the release of a mortgaged property (or a portion of the mortgaged property) subject to the satisfaction of certain conditions described in APPENDIX I to this free writing prospectus. In order to obtain such release (other than with respect to the release of certain non-material portions of the mortgaged properties which may not require payment of a release price), the related borrower may be required (among other things) to pay a release price, which in some cases does not include a prepayment premium or yield maintenance charge on all or a portion of such payment. Any such prepayment may adversely affect the yield to maturity of your certificates. See “—The Yield on Your Certificate Will Be Affected By the Price at Which the Certificate Was Purchased and the Rate, Timing and Amount of Distributions on Your Certificate” in this free writing prospectus.

 

In addition, certain mortgage loans provide for the release, without prepayment or defeasance, of outparcels or other portions of the related mortgaged property that were given no value or minimal value in the underwriting process, subject to the satisfaction of certain conditions. Certain of the mortgage loans also permit the related borrower to add or substitute collateral under certain circumstances.

 

See “Description of the Mortgage Pool—Material Terms and Characteristics of the Mortgage Loans—Partial Releases Other Than in Connection with Defeasance” and APPENDIX I to this free writing prospectus for further details regarding the various release provisions.

 

You Bear The Risk of Borrower Defaults

 

The rate and timing of delinquencies or defaults on the mortgage loans could affect the following aspects of your certificates:

 

·the aggregate amount of distributions on them;

 

·their yields to maturity;

 

·their rates of principal payments; and

 

·their weighted average lives.

 

The rights of holders of each class of subordinate certificates to receive payments of principal and interest otherwise payable on their certificates will be generally subordinated to such rights of the holders of the more senior certificates having an earlier alphabetical or alphanumeric class designation. See “—Subordination of Some Certificates May Affect the Timing of Payments and the Application of Losses on Your Certificates” above.

 

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If losses on the mortgage loans exceed the aggregate certificate principal balance of the classes of certificates subordinated to a particular class, that particular class will suffer a loss equal to the full amount of that excess up to the outstanding certificate principal balance of such class.

 

If you calculate your anticipated yield based on assumed rates of default and losses that are lower than the default rate and losses actually experienced and such losses are allocable to your certificates, your actual yield to maturity will be lower than the assumed yield. Under certain scenarios, such yield could be negative. In general, the earlier a loss is borne by your certificates, the greater the effect on your yield to maturity.

 

Additionally, delinquencies and defaults on the mortgage loans may significantly delay the receipt of distributions by you on your certificates, unless advances are made to cover delinquent payments or the subordination of another class of certificates fully offsets the effects of any such delinquency or default.

 

Also, if the related borrower does not repay a mortgage loan with an anticipated repayment date by its anticipated repayment date, the effect will be to increase the weighted average life of your certificates and may reduce your yield to maturity.

 

Furthermore, if principal and interest advances and/or servicing advances are made with respect to a mortgage loan after default and the mortgage loan is thereafter worked out under terms that do not provide for the repayment of those advances in full at the time of the workout, then any reimbursements of those advances prior to the actual collection of the amount for which the advance was made may also result in reductions in distributions of principal to the holders of the certificates for the current month.

 

Realization on a Mortgage Loan That Is Part of an A/B Whole Loan or Loan Pair May Be Adversely Affected by the Rights of the Related Directing Holder

 

In connection with the making of any material decisions or the taking of any material actions with respect to a mortgage loan that is part of an A/B whole loan or loan pair, or the taking of certain specified actions that would constitute major decisions with respect to the servicing of such mortgage loan, the special servicer will, to the extent set forth in the related intercreditor agreement, be required to obtain the consent of any related directing holder. These actions and decisions may include, among others, certain modifications to such mortgage loan, including modifications, foreclosure or comparable conversion of the related mortgaged properties, sales of such mortgage loan or related REO properties for less than the outstanding principal amount plus accrued interest, fees and expenses, budget approvals, escrow releases, property alterations, replacement of the property manager, debt service coverage ratio determinations and the determination, declaration or waiver of an event of default. As a result of these obligations, the special servicer may take actions with respect to such a mortgage loan that is part of an A/B whole loan or loan pair that could adversely affect the interests of investors in one or more classes of certificates. In addition to the foregoing consent rights, a directing holder may have the right to (i) replace the special servicer with respect to the related A/B whole loan or loan pair at any time with or without cause and/or (ii) exercise a right to cure defaults and/or purchase the related mortgage loan after the mortgage loan becomes a defaulted mortgage loan. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs” for a more complete list of actions and decisions with respect to the A/B whole loans and loan pairs requiring the consent of the related directing holder and a description of the rights of the related directing holder.

 

Any sale of a mortgage loan that is part of an A/B whole loan or loan pair by the special servicer will not terminate or otherwise limit the payment, servicing, intercreditor and other rights of the holder of the related B note or serviced companion loan. The attendant constraints on a prospective purchaser’s ability to control the servicing or special servicing, including the workout, foreclosure or other resolution of the related A/B whole loan or loan pair, may adversely affect the ability of the special servicer to sell the related mortgage loan after a loan default. In addition, the net proceeds of any such sale that does occur may be substantially less than would have been realized if the mortgage loan were not part of an A/B whole loan or loan pair.

 

You Will Have No Control Over the Servicing of Non-Serviced Pari Passu Mortgage Loans

 

Each non-serviced mortgage loan, if any (including the 261 Fifth Avenue mortgage loan following the securitization of the relatedpari passu companion loan) will be secured by a mortgaged property that also secures apari passu companion loan (and, with respect to the Charles River Plaza North mortgage loan, a subordinate

 

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promissory note) that is not an asset of the issuing entity. To the extent a relatedpari passu non-serviced companion loan is included in another securitization, the non-serviced mortgage loan will be serviced and administered by the other master servicer and, if applicable, specially serviced by the other special servicer, in each case under the pooling and servicing agreement related to such other securitization. The controlling class representative under such other pooling and servicing agreement will generally have consent and consultation rights over the actions of the master servicer or special servicer under such pooling and servicing agreement with respect to the related non-serviced loan combination that are similar to the rights of the controlling class representative under this securitization with respect to the mortgage loans included in this securitization trust;provided, that with respect to the Charles River Plaza North non-serviced loan combination, such other controlling class representative will only have such rights to the extent that a related B note is not the controlling note under the related intercreditor agreement. As a result, no certificateholders will have any control over any servicing of any non-serviced mortgage loan (or the 261 Fifth Avenue mortgage loan), except that the controlling class representative under this securitization will have the right to consult with respect to certain matters, on a non-binding basis, with the controlling note holder or the special servicer for any such other securitization to the extent set forth in the related intercreditor agreement. See “Description of the Mortgage Pool—The Non-Serviced Loan Combinations” and “—The A/B Whole Loans and the Loan Pairs” in this free writing prospectus.

 

The Servicing of the 261 Fifth Avenue Loan Pair Is Expected to Shift to Others

 

The servicing of the 261 Fifth Avenue loan pair will be governed by the pooling and servicing agreement only until such time as the related companion loan is securitized in a separate securitization. At that time, servicing responsibilities for the related mortgage loan and related companion loan will shift to the master servicer and the special servicer under such other securitization and will be governed by the pooling and servicing agreement related to such other securitization and the related intercreditor agreement. Neither the closing date of such securitization nor the identity of such other master servicer or special servicer have been determined. In addition, the provisions of such other pooling and servicing agreement have not been determined, although they will be required pursuant to the related intercreditor agreement to satisfy the requirements under “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The 261 Fifth Avenue Loan Pair” and “Servicing of the Mortgage Loans—Additional Matters Relating to the Servicing of the Non-Serviced Mortgage Loans” in this free writing prospectus. Prospective investors should be aware that they will not have any control over the identity of the other master servicer or special servicer, nor will they have any assurance as to the terms of the pooling and servicing agreement related to such other securitization except to the extent of compliance with the requirements referred to in the previous sentence. Moreover, regardless of whether the servicing is governed by the pooling and servicing agreement or a separate servicing agreement, the controlling class representative will not have any consent or approval rights with respect to the servicing of the related loan combination, and we anticipate that the holder of the related companion loan or the controlling party in the related securitization (or such other party specified in the related intercreditor agreement) will have rights similar to or consistent with those granted to the controlling class representative in this transaction with respect to other mortgage loans in the mortgage pool that will be serviced under the pooling and servicing agreement for this transaction. See “Description of the Mortgage Pool—The A/B Whole Loans and the Loan Pairs—The 261 Fifth Avenue Loan Pair” in this free writing prospectus.

 

Interest on Advances and Compensation to the Master Servicer, the Special Servicer and the Trustee May Have an Adverse Effect on the Payments on Your Certificates

 

To the extent described in this free writing prospectus, the master servicer, the special servicer or the trustee, if applicable, will be entitled to receive interest at the “prime rate,” as published in the Wall Street Journal, on unreimbursed advances they have made with respect to delinquent monthly payments or that are made with respect to the preservation and protection of the related mortgaged property or enforcement of the mortgage loan. In addition, the master servicer, special servicer and/or trustee under the applicable other pooling and servicing agreement with respect to any non-serviced loan combination will generally be entitled to receive interest at a similar or the same rate on unreimbursed servicing advances made by such party with respect to such non-serviced loan combination. This interest will generally accrue from the date on which the related advance is made or the related expense is incurred to the date of reimbursement. Advance interest generally will not accrue during the grace period, if any, for the related mortgage loan. This interest may be offset in part by default interest, late payment charges and excess liquidation proceeds paid by the borrower in connection with the mortgage loan or by certain other amounts. In addition, under certain circumstances, including delinquencies in the payment of principal

 

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and/or interest, a mortgage loan will be serviced by the special servicer under this transaction, or with respect to a non-serviced mortgage loan the related special servicer under the related other pooling and servicing agreement that controls servicing for the related non-serviced loan combination, and the related special servicer will generally be entitled to compensation for related special servicing activities. The right to receive reimbursement for an advance with interest on such advance or special servicing compensation will generally be senior to the rights of certificateholders to receive distributions of amounts paid by the related borrower under the related mortgage loan. The payment of interest on advances and the payment of compensation to the related special servicer may result in shortfalls in amounts otherwise distributable on your certificates.

 

Limited Obligations

 

The certificates, when issued, will represent beneficial interests in the issuing entity. The certificates will not represent an interest in, or obligation of, the mortgage loan sellers or sponsors, the depositor, the master servicer, the special servicer, the trust advisor, the certificate administrator, the trustee, the custodian, any affiliate of any of the foregoing, or any other person. The primary assets of the issuing entity will be the notes evidencing 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 free writing prospectus. Payments on the certificates are expected to be derived from payments made by the borrowers on the mortgage loans. We cannot assure you that the cash flow from the mortgaged 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 would receive if all principal and interest payments were made on the mortgage loans.

 

The Mortgage Loan Sellers, the Sponsors and the Depositor Are Subject to Bankruptcy or Insolvency Laws That May Affect the Issuing Entity’s Ownership of the Mortgage Loans

 

In the event of the insolvency, receivership or conservatorship of a mortgage loan seller, a sponsor or the depositor (or certain affiliates thereof, including UBS AG and Bank of America Corporation), it is possible that the issuing entity’s right to payment from or ownership of the mortgage loans could be challenged. Based upon opinions of counsel that the conveyance of the mortgage loans would generally be respected in the event of insolvency of the mortgage loan sellers, which opinions are subject to various assumptions and qualifications, the depositor believes that such a challenge will be 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. Legal opinions do not provide any guaranty as to what any particular court would actually decide, but rather an opinion as to the decision a court would reach if the issues were competently presented and the court followed existing precedent as to legal and equitable principles applicable in bankruptcy cases. In this regard, legal opinions on bankruptcy law matters have inherent limitations primarily because of the pervasive equity powers of bankruptcy courts, the overriding goal of reorganization to which other legal rights and other policies may be subordinated, the potential relevance to the exercise of judicial discretion of future arising facts and circumstances, and the nature of the bankruptcy process. As a result, the FDIC, a creditor, a bankruptcy trustee or another interested party, including an entity transferring a mortgage loan as debtor-in-possession, could still attempt to assert that the transfer of a mortgage loan was not a sale. If such party’s challenge were successful, payments on the certificates would be reduced or delayed. Even if the challenge were not successful, payments on the certificates would be delayed while a court resolves the claim.

 

The transfers of mortgage loans by UBS Real Estate Securities Inc. and Bank of America, National Association to the depositor in connection with this offering are not expected to qualify for the securitization safe harbor (referred to herein as the FDIC Safe Harbor) adopted by the FDIC for securitizations sponsored by insured depository institutions (12 C.F.R. § 360.6 (referred to herein as the Rule)). We cannot assure you that the FDIC, a bankruptcy trustee, if applicable, or another interested party would not attempt to assert that any such transfer was not a sale. Even if a challenge were not successful, it is possible that payments on the certificates would be delayed while a court resolves the claims.

 

The issuing entity has been organized as a common law trust, and as such is not eligible to be a “debtor” under the federal bankruptcy laws. If the issuing entity were instead characterized as a “business trust” it could qualify as a debtor under those laws. Bankruptcy courts look at various considerations in making this determination, so it is not possible to predict with any certainty whether or not the issuing entity would be characterized as a “business trust.”

 

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If a bankruptcy court were to determine that the issuing entity was a “business trust,” it is possible that payments on the certificates would be delayed while the court resolved the issue.

 

Furthermore, Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides for an orderly liquidation authority (OLA) under which the FDIC can be appointed as receiver of certain systemically important non-bank financial companies and their direct or indirect subsidiaries in certain cases. In January 2011, the former general counsel of the FDIC issued an opinion in which he expressed his view that the FDIC, as receiver under the OLA, will not, in the exercise of its OLA repudiation powers, recover as property of a financial company assets transferred by the financial company prior to the end of the applicable transition period to be set forth in future regulations of the FDIC,provided that the transfer satisfies the conditions for the exclusion of assets from the financial company’s estate under the Bankruptcy Code. The former general counsel indicated he would recommend to the Board of Directors of the FDIC that such regulations set forth a transition period of at least ninety (90) days. If,however, the FDIC were to disregard or differently interpret the former FDIC general counsel’s opinion, delays or reductions in payments on the certificates could occur.

 

Limited Liquidity and Market Value May Adversely Affect Payments on Your Certificates

 

The mortgage-backed securities market has recently experienced disruptions resulting from reduced investor demand and increased yield requirements for those securities. As a result, the secondary market for mortgage-backed securities experienced extremely limited liquidity. These conditions may continue or worsen. Accordingly, it is possible that for some period of time investors who desire to sell their certificates in the secondary market may have to sell at a discount from the price paid for reasons unrelated to the performance of the certificates or the mortgage loans. See “Risk Factors—Risks Related to Market Conditions—The Volatile Economy and Credit Crisis May Increase Loan Defaults and Affect the Value and Liquidity of Your Investment” in this free writing prospectus.

 

In addition to the lack of liquidity due to market disruptions, there is currently no secondary market for your certificates and your certificates will not be listed on any national securities exchange or traded on any automated quotation systems of any registered securities association. While we have been advised by each underwriter that it currently intends to make a market in the certificates, none of the underwriters is obligated to do so, any market-making may be discontinued at any time, and we cannot assure you that an active secondary market for the certificates will develop. Additionally, one or more purchasers may purchase substantial portions of one or more classes of certificates. Accordingly, you may not have an active or liquid secondary market for your certificates. Lack of liquidity could result in a substantial decrease in the market value of your certificates. The market value of your certificates also may be affected by many other factors, including the then-prevailing interest rates, market perceptions of risks associated with commercial mortgage lending and trading activity associated with indices of commercial mortgage-backed securities. No representation is made by any person or entity as to what the market value of any certificate will be at any time. Furthermore, you should be aware that the market for securities of the same type as the certificates has in the recent past been volatile and offered very limited liquidity.

 

In addition, you will generally have no redemption rights, and the certificates will be subject to early retirement only under certain specified circumstances described in this free writing prospectus. See “Description of the Offered Certificates—Optional Termination” in this free writing prospectus.

 

The liquidity of the certificates may also be affected by present uncertainties and future unfavorable determinations concerning legal investment. For purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended, no class of certificates will constitute “mortgage related securities.” See “Legal Investment” in this free writing prospectus and in the attached prospectus.

 

In addition, the existence of any right of first refusal or purchase option in favor of any directing holder with respect to a mortgage loan (or related property) that is part of an A/B whole loan or loan pair, or any right of first refusal or purchase option in favor of any third party with respect to any other mortgage loan (or related property) could impede or otherwise adversely affect the ability of the special servicer to sell any such defaulted mortgage loan or the related REO property in a market bidding process, or to obtain competitive bids with respect thereto. In the event a lower price is obtained then would otherwise have been obtained without the existence of the right of first refusal or purchase option, the resulting loss could adversely affect payments on your certificates.

 

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Changes to Accounting Standards Could Have an Adverse Impact on the Offered Certificates

 

We make no representation or warranty regarding any accounting implications related to the offered certificates. The Financial Accounting Standards Board has adopted changes to the accounting standards for structured products that are effective as of the start of the first fiscal year that began after December 15, 2009 for each investor in the offered certificates. These changes, or any other future changes, may impact the accounting for entities such as the issuing entity and could require the issuing entity to be consolidated in an investor’s financial statements. Each investor in the offered certificates should consult its accounting advisor to determine the impact these accounting changes might have as a result of an investment in the offered certificates.

 

Ratings of the Offered Certificates Do Not Represent Any Assessment of the Yield to Maturity That a Certificateholder May Experience and Such Ratings May Be Reviewed, Revised, Suspended, Downgraded, Qualified or Withdrawn By the Applicable Rating Agency

 

Ratings assigned to the offered certificates by the rating agencies engaged by the depositor are based, among other things, on the economic characteristics of the mortgaged properties and other relevant structural features of the transaction. A security rating does not represent any assessment of the yield to maturity that a certificateholder may experience. Ratings assigned to the offered certificates reflect only the views of the respective rating agencies as of the date such ratings were issued. Future events could have an adverse impact on such ratings. Ratings may be reviewed, revised, suspended, downgraded, qualified or withdrawn entirely by the applicable rating agency as a result of changes in or unavailability of information. Ratings do not consider to what extent the offered certificates will be subject to prepayment or that the outstanding certificate principal balance, if any, of any class of offered certificates will be prepaid.

 

Furthermore, the amount, type and nature of credit support, if any, provided with respect to the offered certificates were determined on the basis of criteria established by the rating agencies engaged by the depositor. These criteria are sometimes based upon analysis of the behavior of mortgage loans in a larger group. However, we cannot assure you that the historical data supporting that analysis will accurately reflect future experience, or that the data derived from a large pool of mortgage loans will accurately predict the delinquency, foreclosure or loss experience of the mortgage loans in the issuing entity. As evidenced by the significant amount of downgrades, qualifications and withdrawals of ratings assigned to previously issued commercial mortgage-backed securities during the recent credit crisis, rating agencies’ assumptions regarding the performance of the mortgage loans related to such commercial mortgage-backed securities are not, in all cases, correct.

 

Certain Adverse Changes May Affect Ratings of the Offered Certificates. We are not obligated to maintain any particular rating with respect to any class of offered certificates. Changes affecting the mortgaged properties, the mortgage loan sellers or sponsors, the trustee, the certificate administrator, the custodian, the master servicer, the special servicer, the trust advisor or another person, or changes to ratings criteria in response to legislative and regulatory initiatives or legal actions directed against the rating agencies, may have an adverse effect on any ratings of the offered certificates, and thus on the liquidity, market value and regulatory characteristics of the offered certificates, although such adverse changes would not necessarily be an event of default under the applicable mortgage loan. See “Ratings” in this free writing prospectus.

 

In addition, a ratings downgrade of any class of offered certificates by the rating agencies could affect the ability of a benefit plan or other investor to purchase those certificates. See “Certain ERISA Considerations” and “Legal Investment” in this free writing prospectus.

 

Unsolicited Ratings and the Selection and Qualification of Rating Agencies Rating the Offered Certificates May Impact the Value of the Offered Certificates. Nationally recognized statistical rating organizations that the depositor has not engaged to rate any class of certificates may nevertheless issue unsolicited credit ratings on one or more classes of certificates and any one or more of the rating agencies engaged by the depositor to rate certain classes of certific