Structured Finance

Commercial Mortgage
Presale Report
Morgan Stanley Capital I Inc.,
Series 2006-XLF

$1,555,349,207 Commercial „ Presale Report

Mortgage Pass-Through The preliminary ratings listed at left reflect the credit enhancement
Certificates* provided to each class by subordination of classes junior to it, the
positive and negative features of the underlying collateral, and the
Subor- integrity of the legal and financial structures, including advancing for
dination
Class Ratings (%)
liquidity by the master servicer and the trustee. The preliminary ratings
$890,000,000 A-1 AAA 41.51
do not address the likelihood or frequency of principal prepayments or
$289,313,000 A-2 AAA 22.50 the receipt of prepayment premiums, default interest, additional
$1,521,694,207 X-1** AAA — interest, or penalties. The preliminary ratings on the interest-only
$43,200,000 X-2** NR —
$34,238,000 B AA+ 20.25
certificates address only the likelihood of receiving interest payments
$53,259,000 C AA 16.75 while principal on the related certificates remains outstanding. All
$38,042,000 D AA 14.25 figures and percentages presented in this report are, in the case of loans
$69,473,000 E AA 9.68 that have been split into an A/B note structure, based on the balances
$23,691,000 F AA– 8.13
$23,692,000 G A+ 6.57 of the A notes contributed to the pool and may not be reflective of the
$23,692,000 H A 5.01 whole loan amounts (the combined A and B note balances).
$23,259,000 J A– 3.49
$6,827,000 K BBB+ 3.04
$18,643,000 L BBB 1.82 „ Strengths
$27,745,000 M BBB– — • All pooled whole loans or senior participations of whole loans in
$7,000,000 N-MPA NR —
$11,000,000 N-LAF A– — the trust have credit characteristics consistent with investment-
$3,500,000 N-W40 NR — grade obligations.
$9,200,000 N-RQK BBB- — • Above-average Fitch stressed debt service coverage ratio (DSCR)
$2,000,000 N-SDF BB+ —
$8,000,000 O-LAF BBB– — of 1.54 times (x) and loan-to-value ratio (LTV) of 60.3%. Loans
*Privately placed pursuant to Rule 144A. **Notional totaling 88.4% of the pool by principal balance have a DSCR
amount and interest only. NR – Not rated. above 1.50x.
• High-quality and experienced sponsorship and/or property
Analysts management. In many cases, sponsorship is institutional quality.
Eric Rothfeld • Above-average collateral quality. Of the secured properties, 77.6% by
+1 212 908-0761 allocated loan balance received grades of “B+” or better.
eric.rothfeld@fitchratings.com • Strong structural features, including cash management, up-front
reserves, ongoing reserves, and, in some cases, debt service guarantees.
Daniel Chambers
+1 212 908-0782
daniel.chambers@fitchratings.com Transaction Highlights
Collateral: 14 floating-rate loans on 58 multifamily and
The preliminary ratings do not reflect final commercial properties
ratings and are based on information provided by
issuers as of July 13, 2006. These preliminary Fitch Stressed Debt Service Coverage Ratio: 1.54 times (x)
ratings are contingent on final documents Issuer Debt Service Coverage Ratio: 2.28x*
conforming to information already received. Fitch Stressed Weighted Average Refinance Constant: 9.22%
Collateral may be added or dropped from the
portfolio. Ratings are not a recommendation to Fitch Loan-to-Value Ratio: 60.3%
buy, sell, or hold any security. The prospectus Issuer Loan-to-Value Ratio: 42.7%
and other offering material should be reviewed Loan Size Range: $16,500,000–$575,000,000
prior to any purchase.
Average Loan Size: $111,099,586
Financial Structure: Sequential pay
See pages 6–24 for Collateral
*Assumes London Interbank Offered Rate (LIBOR) of 5.35% for all loans except Magazine
Summary Review. Multifamily Portfolio, MSPA Hotel Portfolio, Lafayette Estates, PHOV Portfolio II, and
Sheraton Delfina, for which the LIBOR cap was used. For ResortQuest Kauai, LIBOR of
5.375% was used, and for the John Hancock Complex, the loan’s fixed swap rate was used.

July 21, 2006

www.fitchratings.com

Parties to Transaction
Lead Underwriter
• Morgan Stanley & Co. Incorporated
Co-Managers
• Bear, Stearns & Co. Inc.
• RBS Greenwich Capital
Master Servicer
• Midland Loan Services, Inc. (rated ‘CMS1’
by Fitch Ratings) (see Fitch Research dated
Oct. 5, 2005, available on Fitch’s web site at
www.fitchratings.com)
Special Servicer
• Midland Loan Services, Inc. (rated ‘CSS1’
by Fitch) (see Fitch Research dated
Oct. 5, 2005, available on Fitch’s web site at
www.fitchratings.com)
Trustee
• Wells Fargo Bank, National Association
Depositor
• Morgan Stanley Capital I Inc.
Seller
• Morgan Stanley Mortgage Capital Inc.*
*For all loans, with the exception of the John Hancock Complex,
which was co-originated by Lehman Brothers.
„ Concerns
• Of the pool, 97.4% has subordinate financing in
place in the form of junior participations of the
first mortgage and/or mezzanine financing.
• Loan concentration. The largest loan represents
37.0% of the pool. The largest three loans
represent 64.3% of the pool.
• Nontraditional property types. One loan,
representing 3.9% of the pool, is secured by a
co-op conversion. One loan, representing 2.6%,
is secured by undeveloped land parcels. Five
loans, representing 19.8% of the pool, are
secured by hotels.
„ Mitigants
• All junior participants and mezzanine lenders have
signed participation and/or intercreditor agreements
that subordinate their rights to those of the senior
participants and the first mortgage lenders. The
presence of additional debt is reflected in the
credit enhancement levels.
Morgan Stanley Capital I Inc., Series 2006-XLF
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Structured Finance
Loan Features
% of Pool
Escrow Requirements
Tax 81.5
Insurance 83.8
Capital Expenditures 65.1
Leasing Costs*
Up-Front 56.0
Ongoing 34.3
Nonrecourse Carveouts**
Environmental 83.8
Fraud 83.8
*As a percentage of commercial properties. **Either to an individual
or a well-capitalized entity.
• Overall, the 14-loan pool is secured by
58 properties. The largest loan, Magazine
Multifamily Portfolio, is secured by 37 different
properties across five states. The second largest
loan is secured by the John Hancock Complex,
including some of the best performing office
buildings in the downtown Boston office market.
The third largest loan, the MSPA Hotel
Portfolio, is secured by six hotels diversified by
both geography and brand.
• The loan secured by a co-op conversion of the
Lafayette Estates is extremely low leveraged at
approximately $32,585 per unit. The loan
secured by undeveloped land parcels and
benefits from strong and desirable locations. It is
overcollateralized, as evidenced by purchase and
sale agreements and/or multiple purchase offers
that, in aggregate, equal almost three times the
outstanding principal balance of the loan. Two of
the five hotel loans, totaling 68.3% of the hotel
concentration, are secured by multiple properties
in geographically diversified locations. All hotels
are located or are in close proximity to major
metropolitan areas with stable economies.
„ Credit Issues
Transaction Structure
The trust assets are nine whole loans and five senior
participation interests in whole loans. Five of the
whole loans contain pooled and unpooled participations
inside the trust.
The transaction has a standard sequential-pay format.
Prior to an event of default, principal and interest
payments are directed to the trust assets and subordinate
interests in the following order of priority: first, to
interest on the trust assets; second, to interest on the
 Structured Finance
subordinate interests; and third, to principal pro rata Sponsor Concentration
on the trust assets and subordinate interests. Principal The following table represents the pool’s sponsor
received on trust assets with pooled and nonpooled concentrations greater than 5.0%:
components will be divided, pro rata, between the
%
pooled component and the nonpooled component. Morgan Stanley Real Estate Fund 50.5
Onex Real Estate Partners 37.0
Following an event of default, the subordinate Sawyer Realty Holdings 37.0
interests’ right to receive payments of principal and Beacon Capital Strategic Partners, LLC 16.4
Pyramid Advisors, LLC 13.5
interest will be subordinate to the trust assets’ right.
Carlyle Realty Partners 12.8
Thus, following an event of default, principal and
interest payments will be directed to the trust assets
and subordinate interests in the following order of In some cases, sponsors may have a limited interest
priority: first, to interest on the trust assets; second, to in the borrowing entity.
principal on the trust assets until paid in full; third, to
interest on the subordinate interests; and fourth, to Geographic Concentration
principal on the subordinate interests. Consequently, The following table shows the pool’s geographic
to the extent that a trust asset with a subordinate concentrations greater than 5.0%:
interest suffers any losses, the subordinate interest
%
will absorb those losses until fully extinguished
Maryland 19.3
before any losses are directed to the trust. Losses that California 17.0
relate to trust assets with pooled and nonpooled Massachusetts 16.4
components will first be absorbed by the subordinate Florida 10.1
interest until fully extinguished and then by the Virginia 9.4
New York 7.0
nonpooled component of the trust asset before any
Texas 5.7
losses are directed to the pooled securities. Hawaii 5.3
Furthermore, the subordinate interests (with the
exception of rake classes) will not have the benefit of
being kept current through servicer advances.
Property Market Metric™
The pool’s average Property Market Metric™ (PMM)
Fitch Ratings Stressed DSCR and LTV
score is 2.64, which is in line with other recent
The following table summarizes the pool’s Fitch
floating-rate deals. The following table summarizes
stressed DSCRs and LTVs:
the pool’s PMM scores:
%
%
Fitch Stressed DSCRs PMM 1 19.2
1.50x–1.75x 88.4 PMM 2 26.2
1.35x–1.49x 7.1 PMM 3 35.9
1.25x–1.34x 4.5 PMM 4 9.3
PMM 5 9.4
Fitch Stressed LTVs
PMM 6 0.0
Less than 65% 66.3
65%–73% 33.7

Property Quality
Loan Diversity Fitch inspected properties securing 13 of the 14 loans
The following represents the pool’s loan concentrations: in the pool, including doing on-site property
• Top three loan concentrations: 64.3%. management interviews for 84.5% of the pool. Fitch
considered the overall collateral quality above average.
• Top 10 loan concentrations: 92.9%.
The results of Fitch’s site inspections are shown in
the following table:
%
“B+” or Higher 77.6
“B” or “B–” 20.0
“C+” or Lower 2.4

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 Structured Finance
Subordinate and Other Additional Financing
Senior Junior Interest Mezzanine
Interest Trust Nontrust Balance Balance Total Debt
Property Name Balance ($000) % of Pool ($000) ($000) ($000)
Magazine Multifamily Portfolio 575.0 37.0 125.0 542.7 1,242.7
John Hancock Complex 255.0* 16.4 — 440.0 950.0
MSPA Hotel Portfolio 170.0 10.9 37.1 71.7 278.8
One Wilshire 147.9 9.5 — 44.4 192.3
Lafayette Estates 61.0 3.9 9.0 — 70.0
Infomart 53.3 3.4 — 15.0 68.3
Market Post Tower 50.5 3.2 7.5 15.0 73.0
119 West 40th & 120 West 41st 48.5 3.1 — 38.2** 86.7
ResortQuest Kauai 43.2 2.8 — 31.2** 74.4
PHOV Portfolio II 40.0 2.6 8.7 27.4 76.0
Sheraton Delfina 30.0 1.9 — 30.0** 60.0
Holiday Inn-Columbus 24.5 1.6 — 10.5 35.0
Laurel Mall 16.5 1.1 — 9.3 25.8
Total — 97.4 — — —
*50% pari passu participation of the whole loan. **Includes future upfundings. Note: Numbers may not add due to rounding.

Subordinate and Other Additional Financing Loans with Interest-Only Periods

The following represents a summary of loans in the The following table summarizes the loans in the pool
pool with subordinate and other additional financing: that provide for payments of interest only for either
• Five loans (57.6% of the pool) have junior the entire loan term or a portion of the loan term:
participation interests or junior notes held outside %
the trust. Interest-Only Loans 90.5
• Twelve loans (93.5% of the pool) have existing Partial Interest-Only Loans —
mezzanine debt that is secured by a pledge of
equity interest in the borrower.
The credit enhancement levels reflect the additional
The holders of the junior participation interests have risk posed by loans that provide for payments of
the following primary rights: interest only for either the entire loan term or a portion
• To appoint an operating adviser. of the loan term.
• To appoint a special servicer, subject to rating
agency confirmation. Encumbered Interest
• To cure monetary defaults through advances on The following table summarizes the pool by
the senior participation. encumbered interest:
• To purchase the senior participation.
%
The holders of the mezzanine interests have the Fee 92.9
following primary rights: Leasehold 7.1

• To approve the property operating budget.

• To terminate, under certain conditions, property All leasehold mortgage loans have lender-friendly
management. terms. The credit enhancement levels reflect the
• To cure monetary defaults through advances on additional risk posed by these leasehold mortgages.
the first mortgage.
• To purchase the first mortgage loan. Multiple Assets/Cross-Collateralization
The presence of additional financing is reflected in Loans secured by multiple assets or loans that are
the credit enhancement levels. cross-collateralized and cross-defaulted represent
50.5% of the pool. These loans are considered to
have a lower loss severity.

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 Structured Finance
Largest Loan Summary
Loan per
Property Property % of Sq. Ft./ DSCR (x) LTV (%)
Property Name Type State Quality Pool Unit ($) Issuer* Stressed** Issuer Stressed†
Magazine Multifamily Portfolio Multifamily Var. B/B+ 37.0 44,508 2.50 1.59 37.4 55.9
John Hancock Complex Office MA A– 16.4 176 2.61 1.53 39.2 59.8
MSPA Hotel Portfolio Hotel Var. B/B+ 10.9 65,731 1.73 1.54‡ 42.0 70.1‡
One Wilshire Office CA B+ 9.5 237 1.71 1.52 55.8 60.5
Lafayette Estates Co-Op
Conversion NY — 3.9 32,585 N.A. N.A. 59.8 65.7
Infomart Office TX B+ 3.4 45 1.88 1.35 50.7 67.1
Market Post Tower Office CA B 3.2 171 2.24 1.41 48.1 63.4
119 West 40th & 120 West 41st Office NY B 3.1 154 1.16 1.30‡ 44.1 68.4‡
ResortQuest Kauai Hotel HI B+ 2.8 138,907 1.65 1.56 50.6 67.5
Waikoloa Land Land HI B 2.6 2,899 N.A. N.A. 23.6 41.3
PHOV Portfolio II Hotel Var. B+ 2.6 46,136 2.00 1.59 43.8 65.9
Top 11 Subtotal 95.4 — 2.22 1.54 42.6 60.3
*Assumes London Interbank Offered Rate (LIBOR) of 5.35% for all loans except Magazine Multifamily Portfolio, MSPA Hotel Portfolio, Lafayette
Estates, PHOV Portfolio II, and Sheraton Delfina, for which the LIBOR cap was used. For ResortQuest Kauai, LIBOR of 5.375% was used, and for
the John Hancock Complex, the loan’s fixed swap was used. **Stressed debt service coverage ratio (DSCR): Average of Fitch constant DSCR and
Fitch term DSCR. †Stressed loan-to-value ratio (LTV): Current loan balance/Fitch value. ‡Based on pooled note. Sq. Ft. – Square foot.
Var. – Various. N.A. – Not applicable.

Terrorism Insurance Seismic studies were completed on six properties,

Currently, 100% of the pool has insurance policies
that do not specifically exclude coverage for acts of
terrorism. Generally, such coverage is required, subject
to annual premium caps for stand-alone terrorism
coverage. However, there can be no guarantee that
terrorism insurance will be in place on an ongoing basis.
Third-Party Reports
Phase I environmental reports and property condition
reports prepared in the past 18 months were available
on greater than 99% of all properties by allocated
loan balance. The credit enhancement levels reflect
the environmental issues noted. Typically, up-front
reserves of 125% of the engineer’s recommended
amount were required for deferred maintenance issues
or the engineer’s cost estimate was immaterial.
representing 16.9% of the pool, that were in locations
deemed to have seismic risk. No property has a
probable maximum loss in excess of 20%. Credit
enhancement levels reflect the seismic risk of the pool.
„ Surveillance
Fitch will review this transaction on an ongoing
basis, which includes a committee review at least
annually. Information can be found on Fitch’s web
site at www.fitchratings.com.
„ Collateral Summary Review
The following pages, 6–24, provide a collateral
summary review of the top 10 loans.

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 Structured Finance
Loan No. 1 — Magazine Multifamily Portfolio

Fitch Credit Assessment (in the context of the pool): ‘AA’ Property Summary
Property Type: Multifamily
Trust Debt Summary Collateral: Fee
Trust Amount: $575,000,000 Total Units: 12,919
Maturity Date: 4/9/08 Location: Various
Spread over LIBOR: 55 basis points Year Built/Renovated: Various
Term LIBOR Cap: 5.00% Occupancy: 90.4% (as of 4/30/06)
Extensions: Three one-year extensions
Amortization: Interest only Structural Features Summary
Sponsors: Morgan Stanley Real Estate Fund, Onex Lock Box: Soft.
Real Estate Partners, and Sawyer Realty Ongoing Reserves: Monthly reserves in place for taxes,
Holdings insurance, and capital expenditures.
Purchase Price – Date: $1.43 billion – March 2006 Property Release: This first 45% of the loan may be released at
a price of 100% of the allocated debt.
Stressed Additional assets may be released in
Amt. Amt. per DSCR LTV conjunction with a 115% release premium.
Debt Stack ($ Mil.) Unit ($) (x) (%) Additionally, the DSCR must be greater than
A Note 575.0 44,508 1.59 55.9 the greater of the DSCR at closing or
Jr. Participation 125.0 54,184 1.31 68.0 immediately prior to any release.
Mezzanine A 140.0 65,021 1.09 81.6
Mezzanine B 115.0 73,922 0.96 92.8
Mezzanine C 120.1 83,219 0.85 104.5
Mezzanine D 167.6 96,192 0.74 120.8
Total 1,242.7 — — —
LIBOR – London Interbank Offered Rate. DSCR – Debt service coverage
ratio. LTV – Loan-to-value ratio.

Fitch Commentary

Strengths
• Property diversity. The loan is secured by 37 class A and B multifamily properties totaling 12,919 units located across five
states in the Mid-Atlantic and Southeast.
• Well-capitalized sponsorship. Morgan Stanley Real Estate Fund currently has a portfolio of more than $13.5 billion in assets
under management. It has raised more than $7 billion in equity over 196 transactions. Onex Real Estate Partners is a
subsidiary of Onex Corporation, a Canadian company with a significant presence in the service, manufacturing, and
technology sectors.
• Experienced management. Sawyer Realty Holdings (Sawyer) has more than 15 years of experience in multifamily
management. Excluding the subject portfolio, Sawyer manages a portfolio of 76 multifamily properties across the eastern
and southern U.S.
• Significant cash equity. Sponsorship has approximately $190 million in cash equity based on the entire debt stack relative to
the $1.43 billion purchase price.

Concern
• The subject properties have generally underperformed primary market competition. As of April 30, 2006, the properties had
an average occupancy of 90.4%, with occupancies ranging from 70.3%–100%. According to Cushman Wakefield, market
competitors have occupancies primarily falling between 95% and 97%.

Mitigant
• Sawyer improved a 1,449-unit Town & Country Portfolio (the previous operator of this portfolio) to an 18% increase in total
revenue and a 14% increase in average rents and reduced turnover to 35% from 50%. The sponsors’ strategy with the
subject portfolio following acquisition is improved performance through more efficient property management, including
raising units to market rents and reducing concessions. In addition, the sponsors will explore strategic asset sales to
deleverage the loan.

Market Information
• The properties are located in Maryland (49.3%), Virginia (25.5%), Florida (15.6%), Pennsylvania (7.9%), and Delaware
(1.7%). The largest exposures fall in the metropolitan statistical areas of Baltimore and northern Virginia.
• The Baltimore multifamily market contains approximately 129,700 apartment units within 503 complexes. The average
vacancy across the market was 4.5% as of year-end 2005, slightly lower than the level in each of the previous two years.
New tenants are receiving minimal concessions, averaging only 0.41 months of free rents. In addition, rents increased an
average 4.2% annually between 1995 and 2005.

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 Structured Finance
• The suburban Virginia multifamily market contains approximately 141,486 units across 490 properties. The average
vacancy across the market was 4.1% as of year-end 2005, slightly lower than in each of the previous two years. Despite
significant new construction over the past few years, vacancy has continued to decline due to a steady increase in demand.

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 Structured Finance
Loan No. 2 — John Hancock Complex

Fitch Credit Assessment (in the context of the pool): ‘BBB+’ Tenant/Occupancy Summary
Major Tenants: John Hancock Financial Services, Inc.
Trust Debt Summary (50% of A Note) (38.5% of NRA); rated ‘AA–’ by Fitch Ratings
Trust Amount: $255,000,000 Investors Bank and Trust Co. (13.3% of NRA);
Maturity Date: 12/9/08 rated ‘A’ by Fitch
Spread over LIBOR: 65 basis points Deloitte & Touche (8.0% of NRA)
Swap Rate: 4.89% Wachovia Corp. (6.3% of NRA); rated ‘AA–’
Extensions: Four six-month options by Fitch
Amortization: Interest only Occupancy: 98.6% leased (as of 3/31/06)
Sponsor: Beacon Capital Strategic Partners II, L.P.
Purchase Price – Date: $935,000,000 – March 2003 Structural Features Summary
Lock Box: Hard.
Stressed Ongoing Reserves: Springing reserves for taxes, insurance, and
Amt. Amt. DSCR LTV capital expenditures.
Debt Stack ($ Mil.) psf ($) (x) (%) Up-Front Reserves: Reserves in place for unpaid leasing costs
A-1 Note* 255.0 176 1.53 59.8 in connection with the Wachovia lease
A-2 Note* 255.0 176 1.53 59.8 ($11.4 million) and rollover and future leasing
Mezzanine A 265.0 267 1.01 90.9 ($25 million).
Mezzanine B 100.0 302 0.89 102.6 Release Provisions: Properties may be released provided no
Mezzanine C 75.0 327 0.82 111.4 event of default has occurred and payment of
a release price of 100% of the allocated loan
Total 950.0 — — —
balance is made.
Property Summary
Property Type: Three office buildings and 1,988-space
parking garage
Collateral: Fee and leasehold
Total sf: 2,902,104
Location: Boston, MA
Year Built/Renovated: 1923,1947,1973/1984,1994

*The A-1 and 1-2 notes are pari passu. The A-1 note will be securitized
in this transaction; the A-2 note is not included in this transaction.
LIBOR – London Interbank Offered Rate. psf – Per square foot.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
sf – Square feet. NRA – Net rentable area.

Fitch Commentary

Strengths
• High asset quality. The John Hancock Tower Complex consists of three trophy assets that have been well maintained and
are 98.6% leased on a long-term basis. Nearly all the floors, including the lower-level floors, in the John Hancock Tower
have unobstructed city views.
• Strong tenancy. Investment-grade tenants account for approximately 64% of the NRA. Leases accounting for 83.4% of the
NRA expire beyond loan maturity.
• Strong sponsorship. Beacon Capital Partners, LLC (Beacon) is a Boston-based real estate private equity investment
company with a current investment portfolio value of approximately $4.5 billion. It is a high-quality property owner,
operator, and developer focusing on office properties in a select number of target markets, including Boston, Washington,
D.C., New York, Los Angeles, San Francisco, Denver, Chicago, and Seattle.
• Strong location. Boston’s Back Bay is considered the city’s most desirable submarket in terms of amenities and proximity to
the affluent western suburbs. The complex is in close proximity to some of Boston’s best retail stores, restaurants, and
luxury hotels. The properties are easily accessible by public transportation, including buses and trolley.

Concerns
• The total debt on the property has a Fitch stressed debt service coverage ratio and stressed loan-to-value ratio of 0.82 times
and 111.9%, respectively.
• Based on the entire debt stack, the sponsor does not retain any equity in the property.

Mitigants
• Since acquiring the asset in March 2003, Beacon has executed three major early lease renewals representing 23.5% of the
total building square footage. In addition, four existing tenants have expanded at the properties, signing a total of
61,121 square feet (sf), with an average total rent of $47.80 per square foot (psf) and average lease term of 8.5 years. This
compares to an in-place average rent of $39.80 psf.
• The Back Bay submarket of Boston has displayed strong improvement in recent years. In the Back Bay, class A office
market vacancy declined and asking rents increased from 10.4% and $34.70 psf, respectively, to 8.0% and $37.04 psf,

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 Structured Finance
respectively, from 2005–2006. In addition, the sponsors have been able to renew expiring leases at the subject buildings at
higher rents.

Market Information
• Overall vacancy in the Boston central business district office market improved from 14.6% in first-quarter 2005 to 12.9% in
first-quarter 2006. The direct weighted average rental rates increased from $29.96 psf to $31.69 psf over the same period.
• The property is located in the Back Bay submarket, which is the second largest in Boston and one of the strongest. The
overall submarket is showing an improvement in direct vacancy and direct weighted average rental rates, from 7.9% and
$33.38 psf, respectively, in first-quarter 2005 to 6.5% and $35.39 psf, respectively, in first-quarter 2006.

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 Structured Finance
Loan No. 3 — MSPA Hotel Portfolio

Fitch Credit Assessment (in the context of the pool): ‘BBB–’ Structural Features Summary
Lock Box: Hard.
Trust Debt Summary Ongoing Reserves: Monthly reserves for taxes, insurance,
Trust Amount: $170,000,000 and FF&E (1.0% of gross revenue for the first
Maturity Date: 12/9/07 12 months, 2% for the next 12 months, 3%
Spread over LIBOR: 149.9 basis points for the next 12 months, and 4% thereafter).
Term LIBOR Cap: 5.00% Up-Front Reserves: 125% of deferred maintenance and
Extensions: Three one-year extensions environmental remediation and any
Amortization: Interest only outstanding renovation work. There is a
Sponsors: Morgan Stanley Real Estate Fund and $14.4 million letter of credit (LOC) as
Pyramid Advisors, LLC additional collateral for this loan. Of this
amount, $4.4 million may be deducted for
Stressed operating expenses or interest shortfalls. An
Amt. Amt. per DSCR LTV additional $6.5 million LOC was posted
Debt Stack ($ Mil.) Room ($) (x) (%) following the sale of the San Antonio Crown
Pooled A Note 170.0 65,731 1.54 70.1 Plaza. All funds will be released when debt
Jr. Participation 37.1 80,147 1.26 85.4 yield exceeds 8.0% for two consecutive
Mezzanine A 43.8 97,103 1.04 103.5 calendar quarters.
Mezzanine B 27.9 107,894 0.94 115.0 Release Provisions: During a cash trap period: the release
payment must be the greater of 95% of sale
Total 278.8 — — —
or refinancing proceeds and 120% of the
allocated loan amount (125% for Daytona
Property Summary
and Columbia); DSCR following release
Property Type: Hotel
(including cash and LOC reserves) must be
Collateral: Fee
the greater of the DSCR at closing and the
Total Rooms: 2,584
DSCR prior to release properties; and the
Location: Various
LTV must be the lesser of the LTV at closing
Year Built/Renovated: Various
or the LTV prior to release. If a cash trap is
LIBOR – London Interbank Offered Rate. DSCR – Debt service coverage not in place, properties may be released by
ratio. LTV – Loan-to-value ratio. FF&E – Furniture, fixtures, and paying 125% of the allocated loan amount for
equipment. Daytona and Columbia and 115% for all
others.
Insurance: An all-risk policy is in place for 100% of the
replacement cost of the assets, inclusive of
any type of windstorm or hail damage.
Cash Trap: The lender shall trap excess cash flow after
payment of all debt service if the DSCR is
below 1.10x or the debt yield is below 8.0%.

Property Summary
(As of April 30, 2006)

Year Built/ Trust Loan Occupancy RevPAR

Property Location Renovated Amount (%) Rooms (%) ADR ($) ($)
Hilton-Daytona Daytona Beach, FL 1988/2005 39.7 742 46.4 146.71 68.03
Marriott-Houston Houston, TX 1980/2004 20.9 600 70.5 107.62 75.85
Hilton-Indianapolis Indianapolis, IN 1971/2004 13.7 332 69.9 126.13 88.20
Marriott-Columbia Columbia, SC 1983/2004 10.0 300 70.1 114.12 80.02
Hilton-Colorado Springs Colorado Springs, CO 1967/2004 9.9 292 72.7 114.87 83.45
Radisson-Northbrook Northbrook, IL 1969/2001 5.8 318 63.7 63.27 40.31
Total — 2,584 62.8 117.36 73.75
ADR – Average daily rate. RevPAR – Revenue per available room.

Fitch Commentary

Strengths
• The portfolio consists of six cross-collateralized/cross-defaulted hotels located in six geographically distinct markets.
• Experienced sponsorship. Morgan Stanley Real Estate Fund was founded in 1991 and currently has more than
$13.5 billion under management. Pyramid Advisors, LLC was formed in 1999 as a hotel development, management, and
advisory company for the hotel industry. The principals have 75 years of combined hospitality experience and actively
manage a portfolio of 49 hotels totaling 13,221 rooms.
• Recent renovations averaging $27,012 per key ($69.8 million) and reflagging from Adam’s Mark hotels to Hiltons,
Marriotts, and a Radisson have repositioned the assets within their competitive set, resulting in increased revenue per
available room (RevPAR) penetration across the portfolio.

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Concerns
• The largest hotel, Hilton-Daytona, is operating at 46.4% occupancy, far below its competitive set average of 68.1%.
• The Hilton-Daytona is highly susceptible to windstorm damage, as evidenced by the hurricane damage it suffered last year.
Since last year, the premium for windstorm insurance at the property has increased to $ 8 million from $250,000.
• Highly leveraged in terms of the entire debt stack.

Mitigants
• As a result of the hurricane damage, the Hilton-Dayton had 129,000 rooms off line in 2005. Rooms operating during the
trailing 12-month period averaged 66.6% occupancy. The hotel is now 100% reopened and fully operational for the first
time as a renovated product with the Hilton flag. As one of the few upscale hotels in the market, Hilton-Daytona’s average
daily rate (ADR) penetration has been well above 100% historically. Both ADR and occupancy are expected to increase
significantly due to the recent renovations and reflagging of the hotel.
• The borrower has shown a commitment to the portfolio by paying the Hilton-Daytona’s $8 million windstorm insurance
premium for the upcoming year. However, the premium is expected to be adjusted down significantly in the following year
to reflect a more commercially reasonable market level.
• The largest hotel, Hilton-Daytona, has considerable cash flow upside upon the completion of a $19 million ($24,000 per
room) improvement plan and reflagging. Renovation work included upgrading of the restaurants, lobby, and pool patio,
complete renovation of rooms in the South Tower (413 rooms), and furniture replacement in the North Tower (329 rooms).

Market Information
• The Hilton-Daytona benefits from an excellent beachfront location, along with a convention center next door, which is in the
process of expanding to 170,000 sf. As of the trailing 12 months ended April 30, 2006, the hotel’s penetration rates for
occupancy, ADR, and RevPAR were 68.1%, 117.5%, and 80.0%, respectively. As reflected in the ADR penetration rate of
117.5%, the Hilton-Daytona is well positioned in the market as an upscale hotel with strong pricing power.
• The Marriott-Houston was converted to the Marriott brand in May 2004, and renovation was completed in December 2004.
The $18 million ($30,000 per room) budget was spent on renovating all 600 rooms, common areas, and meeting spaces. The
Marriott-Houston is located in the Westchase submarket of Houston, a suburban area west of downtown in which hotel
demand is generated increasingly by large corporate accounts. The hotel’s corporate accounts include National Oil,
Halliburton, ATT, Exxon, and Shell. As of the trailing 12 months ended April 30, 2006, the hotel’s penetration rates for
occupancy, ADR, and RevPAR were 100.5%, 81.8%, and 82.2%, respectively.
• The Hilton-Indianapolis was converted to the Hilton brand in August 2004, and the renovation was completed in
September 2005. The $7 million ($21,000 per room) budget was spent on renovating the lobby, front desk, and restaurant.
As of the trailing 12 months ended April 30, 2006, the hotel’s penetration rates for occupancy, ADR, and RevPAR were
100.0%, 92.3%, and 92.4%, respectively.
• The Marriott-Columbia was converted to the Marriott brand in February 2005, and renovation of all 300 rooms, restaurants,
meeting rooms, and pool patio, totaling $9 million ($30,000 per room), was completed in July 2005. Columbia is the
capital of South Carolina and is home to 11 colleges and universities, as well as a new convention center. As of the trailing
12 months ended April 30, 2006, the hotel’s penetration rates for occupancy, ADR, and RevPAR were 113.8%, 117.9%, and
134.2%, respectively.
• The Hilton-Colorado Springs was converted to the Hilton brand in July 2004, and a $7 million renovation ($24,000 per
room) of all 292 rooms and the lobby was completed by September 2005. Recently, the Colorado Springs hotel market
has been buoyed by the increase in tourism and government activity at nearby bases As of the trailing 12 months ended
April 30, 2006, the hotel’s penetration rates for occupancy, ADR, and RevPAR were 122.7%, 118.1%, and 145.0%,
respectively.
• The Radisson-Northbrook was converted to the Radisson brand in September 2004, and the $3 million renovation ($9,400
per room) was completed in September 2005. As part of the renovation program, the guestrooms, bathrooms, and hotel
entrance were upgraded. The Northbrook market depends largely on corporate travel, and the Radisson has a number of
large contracts with Allstate, HSBC, Walgreens, and Korea Air. A Westin and a Sheraton are expected to open in the
next two years but are expected to focus on a higher price point than the Radisson. As of the trailing 12 months ended
April 30, 2006, the Radisson’s penetration rates for occupancy, ADR, and RevPAR were 95.1%, 63.9%, and 60.7%,
respectively.

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Loan No. 4 — One Wilshire

Fitch Credit Assessment (in the context of the pool): ‘BBB+’ Tenant/Occupancy Summary
Major Tenants: Musick Peeler, & Garrett (17.1% of NRA)
Trust Debt Summary Verizon (MCI Telecom) (10.4%)
Trust Amount: $147,944,207 Crowell, Weedon (7.3%)
Maturity Date: 9/9/08 Occupancy: 98.8% (as of 4/30/06)
Spread over LIBOR: 164.5 basis points
Term LIBOR Cap: 5.75% Structural Features Summary
Extensions: Two one-year extension options Lock Box: Hard.
Amortization: 25-year schedule Ongoing Reserves: Monthly reserves for taxes, insurance, capital
Sponsor: Carlyle Realty Partners expenditures, and leasing costs.
Up-Front Reserves: An upfront reserve is in place at closing for
Stressed 125% of all deferred maintenance and
Amt. Amt. DSCR LTV environmental remediation costs, as
Debt Stack ($ Mil.) psf ($) (x) (%) recommended by the third-party engineer.
A Note 147.9 237 1.52 60.5
Mezzanine A 14.8 248 1.34 68.5
Mezzanine B 29.6 293 1.14 81.0
Total 192.3 — — —

Property Summary
Property Type: Office
Collateral: Fee
Total sf: 656,333
Location: Los Angeles, CA
Year Built/Renovated: 1966/1992

LIBOR – London Interbank Offered Rate. psf – Per square foot.

DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
sf – Square feet. NRA – Net rentable area.

Fitch Commentary

Strengths
• Strong sponsorship. Carlyle Realty Partners (CRP) is the real estate investing arm of the Carlyle Group, a global investment
firm that originates, structures, and invests across various transaction types. CRP has acquired or developed more than
3.3 million sf of telecom space and invested in 105 transaction from various property types.
• Diverse tenancy. More than 200 colocation tenants account for approximately 35% of the total net rentable area (NRA). The
largest telecom tenant is Verizon, accounting for 10.4% of the NRA. The largest office/retail tenants, Musick Peeler, &
Garrett and Crowell, Weedon, account for 17.1% and 7.3% of the NRA, respectively. No other single office or retail tenant
accounts for more than 4% of the NRA.
• Asset quality. The subject is one of the premier telecommunication and data centers in the world, only comparable to
60 Hudson Street in New York City and Telehouse in London as far as connection to the global communications network.

Concerns
• Lease rollover. Tenants accounting for 36.5% of the NRA have leases expiring during the loan term.
• Telecom tenants are paying higher rents than office tenants at other downtown Los Angeles office buildings.

Mitigants
• The asset is occupied by a diverse collection of tenants. Of the expiring leases, only Verizon (MCI Telecom) represents a
large concentration of space (10.4% of NRA), and this tenant is subject to multiple leases with various expirations between
2006 and 2009. In addition, One Wilshire is one of the leading communication centers in the world and serves as the
primary switching and interconnectivity point in the western U.S. Carlyle has executed 41 telecom leases at an average rate
of $35.90 psf since acquiring the building in 2001.
• The subject is not comparable to traditional office buildings in Los Angeles because its presence in the telecommunications
sector is unmatched on the West Coast. Traditional office tenants at the subject are paying below-market rents. Recent
telecom tenants at the subject have signed leases averaging $36.99 psf, indicating the premium associated with desirable
telecom space.

Market Information
• The subject is located in downtown Los Angeles at the intersection of Grand Avenue and Wilshire Boulevard. The subject is
a unique asset within the Los Angeles office market because of its status as the primary colocation space provider,
switching, and interconnectivity point on the West Coast of the U.S. Other major data centers in the U.S. include 60 Hudson
Street and 111 Eighth Avenue in New York City. The downtown class A office market as a whole reported average asking

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rents of $21.78 psf and vacancy of 14.5% according to Torto Wheaton Research as of first-quarter 2006, well below the
level of recent leases signed at the subject, averaging $36.99 psf and with occupancy of 98.8%. However, because the
subject is the primary telecom center on the West Coast, it has steadily outperformed the overall office market.

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 Structured Finance
Loan No. 5 — Lafayette Estates

Fitch Credit Assessment (in the context of the pool): ‘BBB–’ Structural Features Summary
Lock Box: Soft.
Trust Debt Summary Ongoing Reserves: Monthly for taxes and insurance. $250 per
Trust Amount: $61,000,000 unsold unit per year for replacement
Maturity Date: 1/9/08 reserves.
Spread over LIBOR: 133 basis points Up-Front Reserves: Conversion reserve of $5.3 million and
Term LIBOR Cap: 5.00% interest reserve of $1.4 million.
Extensions: Six six-month extension options Guaranty: None.
Amortization: Interest only Principal Paydown: Minimum of 92% of gross sales proceeds,
Sponsors: Apollo Real Estate Advisors and with no proceeds released to the borrower
Ramius Capital until the full repayment of the debt, or if the
Purchase Price – Date: $95.0 million – August 2005 DSCR is greater than 1.20x, the borrower
receives any sales proceeds in excess of
Stressed 125% of the allocated loan amount.
Amt. Amt. psf/ DSCR LTV Future Funding: None.
Debt Stack ($ Mil.) Unit ($) (x) (%)
A Note 61.0 32,585 N.A. 65.7
Jr. Participation 9.0 37,393 N.A. 75.4
Total 70.0 — — —

Property Summary
Pre-Conversion
Property Type: Multifamily
Post-Conversion
Property Type: Co-op
Collateral: Fee
Total Units: 1,872
Location: Bronx, NY
Years Built: 1962 and 1969

LIBOR – London Interbank Offered Rate. psf – Per square foot.

DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
N.A. – Not available.

Fitch Commentary

Strengths
• Experienced sponsorship. Apollo Real Estate Advisors (Apollo) is one of the most active and prominent opportunistic real
estate investors in the U.S. and internationally. Since the company’s founding in 1993, Apollo has overseen the investment
of 10 real estate funds totaling more than $5.2 billion in equity. Ramius Capital is an investment management company with
$7.4 billion of assets under management.
• Location. The properties are located southeast of the intersection of the Bruckner Expressway and the Bronx River Parkway
and border Soundview Recreational Park, a 158-acre public park located along the Bronx River. Many of the units have
terraces with views of the Long Island Sound and the Manhattan skyline. In addition, because the properties are naturally
bordered on all sides by the expressway, the East River, and the Soundview Recreational Park, the immediate neighborhood
has less crime problems than other Bronx neighborhoods.
• Cash equity of $25 million based on the August 2005 acquisition price, representing approximately 26.3% of the purchase
price. In addition, the A note represents a low trust amount per unit of $32,708, and the total debt represents $37,534 per unit.

Concerns
• The plans for the co-op conversion have not yet been approved.
• The B note is paid down pro rata with the trust A note while current.

Mitigants
• The plans for the co-op conversion provide a unique opportunity for local residents to purchase partially subsidized low-
income housing. The response from the current rental tenants to the conversion has been very positive, with more than 70%
of all tenants indicating interest in buying their units.
• Fitch’s stressed net sellout value (NSV) of $92.8 million represents $64 psf relative to the A note balance of $48 psf. Based
on Fitch’s NSV, the sale of 58.8% of the units at $102 psf or all units at $55 psf would fully repay the A note and pro rata
subordinate debt. In an event of default, proceeds are applied sequentially throughout the capital stack, with the A note
receiving all principal until repaid.

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Market Information
• The property is located within the Soundview section of the Bronx. Soundview is generally bordered by the Cross-Bronx
Expressway to the north, White Plains Road to the east, the Bronx River to the west, and the East River to the south. The
2004 population within a one-mile radius of the property is estimated at 109,973 and is expected to increase nominally over
the next five years to a projected level of 112,633.
• The property is located in an established neighborhood that has remained relatively stable. The forecast for the area is for
general stability in population growth, with improved conditions for certain area housing developments. The crime rate in
the area has trended downwards, which continues to have a positive impact on communities such as Soundview.

Other Information
• The properties were developed under the Mitchell Lama program, a New York State program that provides affordable
housing to moderate- and middle-income families. The sponsors have the right to exit the Mitchell Lama program and filed
their notice of intent with the Department of Housing and Community Renewal. The exit from the Mitchell Lama program is
expected to occur at the beginning of 2007, at which point the units will be converted to co-ops.

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Loan No. 6 — Infomart

Fitch Credit Assessment (in the context of the pool): ‘BBB–’ Tenant/Occupancy Summary
Major Tenants: Patriot American Hospitality (12.8% of NRA)
Trust Debt Summary MCI WorldCom Communications
Trust Amount: $53,250,000 (10.1% of NRA)
Maturity Date: 5/9/09 Verio (5.6% of NRA)
Spread over LIBOR: 183 basis points Occupancy: 73% (as of 2/6/06)
Term LIBOR Cap: 6.50%
Extensions: Two one-year options Structural Features Summary
Amortization: Interest only Lock Box: Hard.
Sponsors: ASB Capital Management Inc. Ongoing Reserves: Monthly reserves in place for taxes,
DCI Technology Holdings insurance, capital expenditures, and leasing
Purchase Price – Date: $105 million – April 2006 costs ($225,000 per month capped at
$5,000,000 in aggregate).
Stressed Up-Front Reserves: Upfront reserves in place for taxes
Amt. Amt. DSCR LTV ($756,168), insurance ($69,921), and capital
Debt Stack ($ Mil.) psf ($) (x) (%) expenditures (125% of engineer’s
A Note 53.3 45 1.35 67.1 recommended costs).
Mezzanine 15.0 57 1.05 86.1
Total 68.3 — — —

Property Summary
Property Type: Office
Collateral: Fee
Total sf: 1,195,558
Location: Dallas, TX
Year Built/Renovated: 1985/1999
LIBOR – London Interbank Offered Rate. psf – Per square foot.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
sf – Square feet. NRA – Net rentable area.

Fitch Commentary

Strengths
• Experienced sponsorship and management. ASB Capital Management Inc. (ASB), a subsidiary of Chevy Chase Bank, has
$8 billion of assets under management, including a real estate portfolio of 74 properties across 25 markets. ASB has owned
and/or operated more than 700,000 sf of assets in the telecommunications sectors. DCI Technology Holdings (DCI), a real
estate equity and management company, currently owns or operates six data centers in the U.S. for such clients as Ebay,
Global Crossing, and Qwest.
• Asset quality. Infomart is a seven-story class A office and telecommunications center. Primarily due to its fiber access,
power capacity, and energy power backup, Infomart has served as one of the primary data centers in Dallas and the
southeast region of the U.S.
• Tenant diversity. The subject consists of 640,000 sf of telecommunication space, in addition to 550,000 sf of traditional
office space. The telecommunication space is occupied by 42 tenants, none occupying greater than 5.6% of the building’s
NRA. Two office tenants, Patriot American Hospitality and MCI WorldCom Communications, occupying 12.8% and 10.1%
of the NRA, respectively, are the sole office tenants occupying greater than 3.2% of the NRA.
• ASB and DCI have $36.75 million in cash equity in the deal based on the entire debt stack and acquisition price.

Concerns
• A loan secured by the subject property included in the GMAC 2002-FL1 transaction incurred a maturity default following a
decline in occupancy due to stress in the telecommunications sector.
• Rollover risk. The two largest office tenants, Patriot American Hospitality and MCI WorldCom Communications, have
leases expiring in 2007.

Mitigants
• The previous loan was purchased out of bankruptcy for $105 million and refinanced, allowing full recovery for the previous
securitized loan. The current debt stack of $68.25 million is lower leveraged than the $115 million of previous financing,
with far greater equity held by the sponsors.
• An ongoing reserve is in place for leasing costs, accruing to a maximum of $5 million. Leasing activity at the subject has
been strong, with more than 100,000 sf of new leases signed in 2005 at rents in line with the market and an additional
50,000 sf of new leases signed since the owner took possession of the subject in April 2006. In addition, the
telecommunication portion of the building is likely to sustain or exceed its current occupancy because those tenants tend not
to relocate because of high relocation costs and substantial equity investments.

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Market Information
• Infomart is located on Stemmons Freeway, the most heavily trafficked route through downtown Dallas. The location is on
the border of the Turtle Creek/Uptown submarket, the strongest office submarket in Dallas.
• According to Torto Wheaton Research, as of first-quarter 2006, the Stemmons Freeway submarket had a direct vacancy rate
of 34.1% across all office classes and a class A asking rent of $17.08 psf. Turtle Creek/Uptown, one of Dallas’ strongest
submarkets, had direct vacancy of 10.8% across all classes (10.5% for class A space) and class A asking rent of $23.49 psf.
In comparison, traditional office tenants at the subject pay an average rent of $18.29 psf. Low-capacity telecom tenants pay
an average of $22.14 psf, while high-capacity telecom tenants pay an average of $28.71 psf.

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Loan No. 7 — Market Post Tower

Fitch Credit Assessment (in the context of the pool): ‘BBB–’ Tenant/Occupancy Summary
Major Tenants: Government Services Administration
Trust Debt Summary (47.9% of NRA)
Trust Amount: $50,500,000 Verizon/MCI (16.8% of NRA)
Maturity Date: 11/9/07 (telecom tenant)
Spread over LIBOR: 139 basis points URS Corp. (5.9% of NRA)
Term LIBOR Cap: 5.50% Occupancy: 95.1% (as of 4/30/06)
Extensions: Three one-year
Amortization: Interest only Structural Features Summary
Sponsors: Carlyle Realty Partners and Washington Lock Box: Hard.
State Holdings Ongoing Reserves: Real estate taxes, insurance, capital
expenditures ($0.35 psf for office/telecom
Stressed and $5.00 psf for collocation; total capped at
Amt. Amt. DSCR LTV $800,000), and leasing costs ($240,000 per
Debt Stack ($ Mil.) psf ($) (x) (%) month for the first 30 months totaling
A Note 50.5 171 1.41 63.4 $6.51 million or an upfront letter of credit
Jr. Participation 7.5 187 1.23 72.8 totaling $6.5 million as of 10/1/07).
Mezzanine 15.0 236 0.98 91.6 Up-Front Reserves: Deferred maintenance.
Other Features: Excess cash flow sweep in the event that, at
Total 73.0 — — —
any time, the net operating income is less
than $6 million in year one, $7 million in year
Property Summary
two, or $8 million in year three.
Property Type: Office
Collateral: Fee
Total sf: 309,579
Location: San Jose, CA
Year Built/Renovated: 1984/1999
LIBOR – London Interbank Offered Rate. psf – Per square foot.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
sf – Square feet. NRA – Net rentable area.

Fitch Commentary

Strengths
• Strong sponsorship. CRP is the real estate investing arm of the Carlyle Group, a global investment company that originates,
structures, and invests in various transaction types. CRP has acquired or developed more than 3.3 million sf of telecom
space and invested in 105 transactions from various property types.
• High-quality asset. The property has a mixture of traditional office space, telecom space, and colocation space, which is
used to facilitate interconnections between various telecom tenants within the building. The property has telecommunication
amenities, such as superior fiber access, excess power capacity, and emergency power backup. The property commands
higher rents than office comparables due to its telecom amenities/capacity.

Concern
• The Government Services Administration lease, representing 47.9% of the NRA, expires in February 2008.

Mitigant
• The loan is structured with a leasing cost reserve funded from a borrower option of $240,000 per month for the first
30 months of the loan term or an up-front cash payment or letter of credit for $6.51 million on Oct. 31, 2007.

Market Information
• San Jose is located 48 miles south of San Francisco and 38 miles south of Oakland, CA. San Jose experienced a decline in
office rents and occupancy in conjunction with other Silicon Valley cities following the burst of the bubble in the
technology sector. In recent years, the economy has stabilized, with personal bankruptcies declining, the housing market
stabilizing, and industrial production increasing. The Silicon Valley office market has made a strong recovery, with rising
occupancy and asking rents.
• The property is located in downtown San Jose at the intersection of Market Street and Post Street. Per Torto Wheaton
Research, the market vacancy was 20.5% with asking rents of $27.93 psf as of first-quarter 2006. The actual vacancy at the
property was 4.7%, with in-place rents of $28.83 psf (for office space only).

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Loan No. 8 — 119 West 40th & 120 West 41st

Fitch Credit Assessment (in the context of the pool)*: ‘BBB–’ Property Summary
Property Type: Office
Trust Debt Summary Total Properties: Two
Trust Amount: $48,500,000 Collateral: Fee
Maturity Date: 3/9/11
Spread over LIBOR: 94 basis points Structural Features Summary
Term LIBOR Cap: 6.00% Lock Box: Hard.
Extensions: None Ongoing Reserves: Monthly reserves in place for taxes,
Amortization: Interest only insurance, capital expenditures, and leasing
Sponsors: AEW Partners V, LP and Colliers ABR, Inc. costs.
Purchase Price – Date: $105 million – 2006 Future Funding
Obligation: $8 million of future funding obligations may
Stressed be drawn on a monthly basis for usage
Amt. Amt. DSCR LTV allocated among interest shortfalls
Debt Stack ($ Mil.) psf ($) (x) (%) ($3 million), lease-up costs ($4 million), and
Pooled A Note 45.0 134 1.30 68.4 incurred approved capital expenditures
Nonpooled A Note 3.5 154 1.21 73.7 ($1 million). The upfundings will be allocated
Mezzanine A** 28.3 230 0.75 116.7 among the mezzanine pieces.
Mezzanine B** 9.9 259 0.67 131.8 Insurance: An all-risk insurance policy is in place for
100% of the full replacement cost of the
Total 86.7 — — —
assets. If terrorism insurance is excluded
*Only the pooled trust amount of $45 million is rated ‘BBB–’ by from the all-risk policy, a separate policy is
Fitch Ratings. **Assumes future funding obligation is fully drawn. required, subject to a premium cap of
LIBOR – London Interbank Offered Rate. psf – Per square foot. $150,000.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.

Property Summary
Trust Loan
Year Amount Size Occupancy NRA of Largest
Property Location Built (%) (000 sf) (%) Largest Tenant(s) Tenant(s) (%)
Century Business Credit
(a subsidiary of Wells Fargo
119 W. 40th New York, NY 1915 82.0 315.0 88.3 Bank) 24.6
120 W. 41st New York, NY 1914 18.0 19.6 19.9 Simply Pasta 19.9
Total/Weighted Average 100.0 334.6 — —

sf – Square feet. NRA – Net rentable area.

Fitch Commentary

Strengths
• Below-market rents. The average in-place rents at 119 West 40th Street are $23.77 psf, well below the submarket rents of
$37 psf per the appraiser and $38.62 psf for class B office space in the Times Square/Theatre district submarket as of first-
quarter 2006, according to Torto Wheaton Research.
• Low loan psf of $134.52 based on the trust amount.
• Strong midtown location. The subject buildings are located on 40th and 41st Streets along Sixth Avenue in close proximity
to Bryant Park, Times Square, and Grand Central Station.
• Well-capitalized sponsorship. AEW Partners V, LP is a real estate investment and advisory company with more than
$20 billion in assets under management. Colliers ABR, Inc. is a full-service commercial real estate company with
approximately 14 million sf of office space under management in the New York City area.
• Development potential. 120 West 41st Street is zoned for 12 floors of office or hotel development or 10 floors of residential
development in a desirable midtown location. The building currently is on 19,600 sf, consisting of one floor of ground-level
retail and four floors of vacant office space.

Concerns
• Expiring leases. 119 West 40th Street has leases totaling 93,000 sf (29.5% of NRA) expiring by August 2007.
• The building at 120 West 41st Street is almost entirely vacant.

Mitigants
• Rents at the 40th Street building average $23.77 psf, well below current market rents. Upon lease expiration, management
expects to sign new leases at market rents. The future funding obligation allocates $4 million toward lease-up costs.

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• Zoning for the 41st Street building permits redevelopment that would allow the existing building to be significantly
expanded. Rather than leasing the vacant space, the sponsor is expected to redevelop the property or sell it to a developer.

Market Information
• The subject buildings are located in the Times Square submarket of Manhattan. The two buildings, located between Sixth
and Seventh Avenues on 40th and 41st Streets, respectively, are each located in close proximity to Times Square, Bryant
Park, and Grand Central Station, in addition to numerous bus and subway lines. According to Torto Wheaton Research, as
of the first-quarter 2006, the Times Square submarket had average gross asking rents of $38.62 psf and average vacancy of
8.6%. This central Manhattan location makes the subject buildings valuable assets operating in the office, residential, or
lodging sectors.

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Loan No. 9 — ResortQuest Kauai

Fitch Credit Assessment (in the context of the pool): ‘BBB–’ Occupancy/Revenue Summary
As of Date: 12/31/05
Trust Debt Summary TTM Occupancy: 45.1%
Trust Amount: $43,200,000 TTM ADR: $103.50
Maturity Date: 7/9/09 TTM RevPAR**: $46.64
Spread over LIBOR: 90.5 basis points
Term LIBOR Cap: 6.00% Historical RevPAR Summary
Extensions: Two one-year options 2004 RevPAR**: $14.44
Amortization: Interest only 2003 RevPAR**: $30.90
Sponsors: RREEF (80.1%) and Gaylord Entertainment
Company (19.9%) Structural Features Summary
Purchase Price – Date: $85.4 – June 2006 Lock Box: Hard.
Ongoing Reserves: Monthly reserve in place for taxes and
Stressed insurance.
Amt. Amt. per DSCR LTV Up-Front Reserves: $2 million reserve in place for capital
Debt Stack ($ Mil.) Room ($) (x) (%) expenditures and $1 million for debt service
A Note 43.2 138,907 1.56 67.5 payments.
Mezzanine A* 15.6 189,550 1.14 92.0
Mezzanine B* 15.6 240,193 0.90 116.6
Total 74.4 — — —

Property Summary
Property Type: Hotel
Collateral: Fee
Total Rooms: 311
Location: Kauai, HI
Year Built/Renovated: 1977/2006
*Includes future upfundings. **The hotel was undergoing an extensive
renovation from 2003–2005. LIBOR – London Interbank Offered Rate.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
TTM – Trailing 12 months. ADR – Average daily rate.
RevPAR – Revenue per available room.

Fitch Commentary

Strengths
• Strong market fundamentals. Kauai hotels have maintained strong performance historically, partially attributable to limited
supply, as the island is less developed than the other main Hawaii islands. Large portions of the island are undeveloped,
preserved as rain forest and deep valleys. Total visitation to Hawaii in 2005 was greater than 7.0 million visitors, according
to the State of Hawaii, a historical high. The percentage of domestic tourists has been steadily increasing.
• Significant capital expenditures. The property underwent a $20 million renovation between October 2003 and
November 2005, when the hotel was rebranded a Courtyard by Marriott. The borrower rebranded the hotel as a ResortQuest
in conjunction with an additional $10 million renovation that will include $6 million allocated to landscaping and the hotel
pool.
• Well-capitalized sponsorship. RREEF, a subsidiary of Deutsche Asset Management, is a family of real estate and equity
funds. Currently, RREEF has approximately $68 billion of assets under management. Gaylord Entertainment Company
operates the Resort Quest platform, which focuses on hospitality and vacation rental property management. ResortQuest
currently operates 17,000 units across hotels, private homes, villas, and condos located nationwide. Included in this portfolio
are 5,000 rooms across 28 hotels and condominium resorts in Hawaii.

Concerns
• The hotel has not reached the stabilized performance that is forecast for an asset of the quality and location of the subject.
RevPAR ranged from $30.90–$46.64 from 2003–2005, during which the hotel was under extensive renovation.
• The Hawaii hotel market is highly susceptible to political and economic factors, both domestically and internationally.
Evidence includes poor performance after the events of Sept. 11, 2001, from a slowdown in tourist travel from Asia as a
result of SARS, and the impact of the Iraqi War.

Mitigants
• The subject underwent a $20 million renovation ($64,309 per key) from 2003–2005. Sponsorship has shown a strong
commitment to renovating the subject (an additional $32,154 per key) to offer a superior product in a desirable market.
• Hawaii has a diverse tourism draw. Having relied on international visitors historically, Hawaii has experienced a significant
increase in domestic tourism, creating a better balance of customers in the lodging and tourism industries.

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Market Information
• The subject is located in the city of Kapaá along the east coast of Kauai. Kauai is the most northern of Hawaii’s main
islands, and at 550 square miles, it is Hawaii’s fourth largest island. However, of the main islands, Kauai is the least
developed, as large portions of the islands have been preserved as rain forest and deep valleys. The east coast of the island
houses Kauai’s airport, located six miles from the subject, and many of the midlevel hotels by price point. Tourism to Kauai
has increased at an average annual rate of 2.8% since 1995, according to the Hawaii State Department of Business. Hawaii
tourism has experienced improved performance as domestic travel has increased steadily in the past 10 years, boosted by an
increased number of flights added from East Coast cities.

Other Information
• The property is initially being acquired as a leasehold interest, a common structure in Hawaii real estate. However, the
borrower has exercised the right to purchase the land for $8.4 million. The lender is financing 80% of the acquisition price
of the ground and will place this money in escrow until the conclusion of a 120-day period following delivery of notice of
intent. If, for any reason, the fee acquisition does not close, these funds will be used to pay down the principal balance, with
a $3 million allocation to the A note. A comparison of this prepayment with the addition of a ground rent payment would
result in a lower leveraged mortgaged loan than the current analysis, assuming the option is exercised.

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Loan No. 10 — Waikoloa Land

Fitch Credit Assessment (in the context of the pool): ‘AA’ Property Summary
Property Type: Land
Trust Debt Summary Total Tax Parcels: 22
Trust Amount: $40,000,000
Maturity Date: 1/9/08 Structural Features Summary
Spread over LIBOR: 425 basis points Lock Box: Hard.
Term LIBOR Cap: 5.50% Ongoing Reserves: Monthly reserves in place for taxes and
Extensions: One six-month option insurance.
Amortization: Interest only Up-Front Reserves: A debt service reserve ($5.93 million),
Sponsor: Vitoil Corporation approved development costs ($4 million),
Purchase Price – Date: $60 million – September 2005 taxes ($545,367), and insurance ($12,113)
are in place at closing.
Stressed Release: The release of individual parcels is permitted
Amt. Amt. per DSCR LTV subject to prepayments of the greater of 80%
Debt ($ Mil.) Acre ($) (x) (%) of the net sales proceeds or 70% of the gross
A Note (Whole Loan) 40.0 2,889 N.A. 41.3 sales proceeds. The minimum release price
by parcel is as listed in the table below.
LIBOR – London Interbank Offered Rate. psf – Per square foot.
DSCR – Debt service coverage ratio. LTV – Loan-to-value ratio.
N.A. – Not available.

Property Summary

Entitled Minimum
Trust Loan Residential Development Release
Type of Parcel Location Size (Acres) Amount (%) Units Horizon Price ($ Mil.)
Highlands Hawaii 4,210 20.16 677 Medium Term 21
Commercial Hawaii 45 21.00 N.A. Short Term 20
Queen K Highway Hawaii 3,784 19.65 643 Long Term 20
Ranchlands Hawaii 5,184 18.90 220 Medium Term 20
Multifamily Residential Hawaii 42 15.56 1,014 Short Term 20
Golf Estates Hawaii 533 4.72 453 Short Term 27
Total/Weighted Average 13,797 100.00 3,008 —

N.A. – Not applicable. Note: Numbers may not add due to rounding.

Fitch Commentary

Strengths
• Structure of the transaction. The loan is fully recourse to a sponsor with significant net worth. All parcels are zoned for
various uses, including commercial and residential use. The 45-acre commercial parcel and 42-acre multifamily residential
parcel are zoned for their ultimate use and can be developed imminently. In addition, a reserve is in place for the entire
outstanding debt service over the initial term.
• Purchase and sale agreements are in place for the commercial and residential parcels for $31 million and $26.3 million,
respectively, contingent on the completion of due diligence by the involved parties. In addition, the purchase and sale
agreement is in place for the golf estates for $55 million, contingent on a land designation change from urban to rural to
allow for higher density development. The release prices of the 45-acre commercial parcel and 42-acre multifamily
residential parcel total $40 million, equal to 100% of the loan’s outstanding principal balance.
• Strong location. The parcels of land are located in the South Kohala district of The Big Island. South Kohala is known for its
world-class resort communities, such as Mauna Kea Resort, Mauna Kani Resort, and the Waikoloa Beach Resort. In
addition to tourism, the district has experienced significant population growth and reduced unemployment in recent years.

Concerns
• The loan is secured entirely by undeveloped land. This is significantly more volatile than traditional commercial real estate
because development is highly susceptible to changing economic conditions, construction costs, and state
regulations/ordinances.
• The Ranchlands parcel, totaling 5,184 acres, has no water source. Due to a deed restriction, the sponsor is prohibited from
drilling on the collateral.
• The Queen K Highway parcel, accounting for 3,784 acres, is a long-term project, with a development or sale horizon of
greater than five years.

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Mitigants
• Three purchase and sale agreements are in place for $112.3 million. Two agreements totaling $57.3 million are from parcels
that are fully entitled and zoned and conditioned only on final due diligence. The loan’s total collateral is equal to $2,899 per
acre, well below sales comparables for the various land uses.
• In regards to the Ranchlands, the sponsor is currently exploring alternative water sources, such as the adjacent Parker Ranch.
The sponsor estimates the cost of the water source from $2 million–$5 million. Purchase offers between $29 million–$35
million have already been received by the sponsor for the Ranchlands parcel.
• The Queen K Highway is the largest developable parcel of land along the primary access route to Waimea and Kona. As
such, the parcel has the potential to be developed into a large master-planned community, including residential, commercial,
hotel, and civic space.

Market Information
• The property is located in Waikoloa Village of the South Kohala district on the island of Hawaii. The island of Hawaii, also
known as the Big Island, is more than 4,000 square miles and twice the size of any of the other islands of Hawaii. Tourism is
the dominant industry of Hawaii, which had approximately 7.0 million visitors in 2004. The South Kohala district of the Big
Island has several world-class resort communities. While tourism continues to drive the economy, the area is also well
known for ranching and agriculture. Waikoloa Village has experienced steady population growth recently, averaging 7.87%
annually between 2000 and 2005. Hawaii Information Service reports that sales of residential, condominium, and vacant
land have increased by between 34% and 51% over the past year.

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