Merrill Lynch & Co. (Co-Manager)

Transcription

1 OFFERING MEMORANDUM (For use as the Listing Particulars) $1,950,000,000 BEAR STEARNS COMMERCIAL MORTGAGE SECURITIES INC. Commercial Mortgage Pass-Through Certificates, Series 2004-ESA The Commercial Mortgage Pass-Through Certificates, Series 2004-ESA (the Certificates ), represent beneficial ownership interests in a trust fund (the Trust Fund ) to be established by Bear Stearns Commercial Mortgage Securities Inc., a Delaware corporation (the Depositor ). The Trust Fund consists primarily of the senior participation interest (the Trust Asset ) in a single, recently originated, non-recourse first mortgage loan made jointly by Bear Stearns Commercial Mortgage, Inc. and Bank of America, N.A. (collectively, the Trust Asset Sellers ) to BRE/ESA Properties L.L.C., a Delaware limited liability company, BRE/ESA FL Properties L.L.C., a Delaware limited liability company, BRE/ESA MD Borrower L.L.C., a Delaware limited liability company, BRE/ESA MN Properties L.L.C., a Delaware limited liability company, BRE/ESA PA Properties L.L.C., a Delaware limited liability company and BRE/ESA TX Properties L.P., a Delaware limited partnership (each, a Mortgagor and, together, the Mortgagors ). The Mortgagors or, with respect to the Mortgaged Properties located in Maryland, the Maryland Owner are the owners (or, with respect to 2 Mortgaged Properties, the ground lessees) of 485 extended-stay hotel properties (collectively, the Mortgaged Properties ) which are located in 42 states. The Certificates consist of the following classes (each, a Class ), designated as the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K Certificates (the Principal Balance Certificates ), the Class X-1 and Class X-2 Certificates (the Class X Certificates and, together with the Principal Balance Certificates, the Offered Certificates ), one or more classes of Class Q Certificates (the Class Q Certificates ), the Class X-1B Certificates and the Class R and Class RL Certificates (the Class R and Class RL Certificates collectively, the Residual Certificates ). Only the Offered Certificates are being offered hereby. It is a condition to the issuance of the Certificates that the Offered Certificates receive the ratings set forth on this cover by Moody s Investors Service, Inc. ( Moody s ), Standard and Poor s Ratings Services, a division of The McGraw-Hill Companies, Inc. ( S&P ), Fitch, Inc. ( Fitch ) and Dominion Bond Rating Services ( DBRS and, together with Moody s, S&P and Fitch, the Rating Agencies ). See Ratings. Application has been made to the Irish Stock Exchange for the Offered Certificates (other than the Class X Certificates) to be admitted to the Daily Official List. This document comprises listing particulars (the Listing Particulars ) and is provided only for the purpose of obtaining approval for listing of the Offered Certificates (other than the Class X Certificates) on the Irish Stock Exchange and shall not be used or distributed for any other purposes. These Listing Particulars do not constitute an offer to sell, or a solicitation of an offer to buy, any of the Certificates. Any such offer or solicitation may only be made on the basis of the related Offering Memorandum dated June 23, 2004, which document does not form part of these Listing Particulars. None of the web sites listed herein comprise part of the Listing Particulars. PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES DO NOT REPRESENT ANY INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE TRUST ASSET SELLERS, THE TRUSTEE, THE INITIAL PURCHASERS OR ANY OF THEIR RESPECTIVE AFFILIATES. NONE OF THE OFFERED CERTIFICATES NOR THE TRUST ASSET IS INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON. THE CERTIFICATES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT ), OR ANY STATE SECURITIES LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT (A) TO QUALIFIED INSTITUTIONAL BUYERS ( QIBs ) IN TRANSACTIONS COMPLYING WITH THE REQUIREMENTS OF RULE 144A UNDER THE SECURITIES ACT ( RULE 144A ), (B) TO OTHER INSTITUTIONAL ACCREDITED INVESTORS AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT ( INSTITUTIONAL ACCREDITED INVESTORS ) AND (C) TO PURCHASERS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S UNDER THE SECURITIES ACT. THE CERTIFICATES ARE NOT TRANSFERABLE EXCEPT UPON SATISFACTION OF CERTAIN CONDITIONS AS DESCRIBED UNDER NOTICE TO INVESTORS. See Risk Factors on page 32 for a description of certain risks and other special considerations relevant to an investment in the Offered Certificates. Initial Class Certificate Balance or Notional Amount (1) Expected Final Distribution Date (3) Expected Extended Final Distribution Date (4) Rated Final Distribution Date Expected Ratings (Moody s/s&p/fitch/dbrs) Class of Offered Certificates Pass-Through Rate Class A-1... $ 445,000,000 LIBOR plus 0.22% (2) May 14, 2007 May 14, 2009 May 14, 2016 Aaa/AAA/AAA/AAA Class A-2... $ 689,500,000 LIBOR plus 0.34% (2) May 14, 2007 May 14, 2009 May 14, 2016 Aaa/AAA/AAA/AAA Class A-3... $ 103,500, % May 14, 2009 May 14, 2009 May 14, 2016 Aaa/AAA/AAA/AAA Class X-1... $ 1,800,000,000(5) (6) May 14, 2009 May 14, 2009 May 14, 2016 Aaa/AAA/AAA/AAA Class X-2... $ 1,134,500,000(7) (8) May 14, 2007 May 14, 2009 May 14, 2016 Aaa/AAA/AAA/AAAm (9) Class B... $ 80,000, % May 14, 2009 May 14, 2009 May 14, 2016 Aa1/AA+/AA+/AA(high) Class C... $ 96,000, % May 14, 2009 May 14, 2009 May 14, 2016 Aa2/AA/AA/AA Class D... $ 65,000, % May 14, 2009 May 14, 2009 May 14, 2016 Aa3/AA-/AA-/AA(low) Class E... $ 128,000, % May 14, 2009 May 14, 2009 May 14, 2016 A2/A/A/A Class F... $ 43,000, % May 14, 2009 May 14, 2009 May 14, 2016 A3/A-/A-/A(low) Class G... $ 43,000, % May 14, 2009 May 14, 2009 May 14, 2016 Baa1/BBB+/BBB+/BBB(high) Class H... $ 40,000, % May 14, 2009 May 14, 2009 May 14, 2016 Baa2/BBB/BBB/BBB Class J... $ 67,000, % May 14, 2009 May 14, 2009 May 14, 2016 Baa3/BBB-/BBB-/BBB(low) Class K... $ 150,000,000 LIBOR plus 2.50% (2) May 14, 2007 May 14, 2009 May 14, 2016 Ba1/BB+/BB+/BB(high) (1) Subject to a permitted variance of 10%. (2) Subject to change as described herein for any Distribution Date commencing with the second Distribution Date following the Floating Rate and Swap Maturity Date. (3) Determined assuming no prepayments prior to the Initial Floating Rate and Swap Maturity Date or the Fixed Rate Maturity Date of the Mortgage Loan, no defaults, no acceleration of the Maturity Date of the Mortgage Loan and that no extension options are exercised. (4) Determined assuming no prepayments prior to the Maturity Date of the Mortgage Loan, no defaults, no acceleration of the Maturity Date of the Mortgage Loan and that all extension options are exercised. (5) The Class X-1 Certificates do not have a Certificate Balance or receive distributions of principal. The Notional Amount of the Class X-1 Certificates, or any individual Class X-1 Certificate, is the amount on which such Class or such Certificate, as the case may be, will accrue interest, as described under Description of the Certificates General. (6) On or prior to the Distribution Date in May 2009, the Pass-Through Rate on the Class X-1 Certificates for any Distribution Date will be equal to the weighted average of the Pass-Through Rates of those Class X Components that comprise the Class X-1 Certificates on such Distribution Date, weighted on the basis of the notional amount of each such Class X Component, as described under Description of the Certificates General. Thereafter, the Pass-Through Rate for the Class X-1 Certificates will be 0%. For the initial Interest Accrual Period, the Pass-Through Rate for the Class X-1 Certificates will be %. (7) The Class X-2 Certificates do not have a Certificate Balance or receive distributions of principal. The Notional Amount of the Class X-2 Certificates, or any individual Class X-2 Certificate, is the amount on which such Class or such Certificate, as the case may be, will accrue interest, as described under Description of the Certificates General. (8) On or prior to the Distribution Date in June 2006, the Pass-Through Rate on the Class X-2 Certificates will be 0% per annum. After the Distribution Date in June 2006 and through and including the Distribution Date immediately following the Floating Rate and Swap Maturity Date, the Pass-Through Rate for the Class X-2 Certificates will be equal to the weighted average of the Pass-Through Rates of those Class X Components that comprise the Class X-2 Certificates, weighted on the basis of the notional amount of each such Class X Component, as described under Description of the Certificates General. Thereafter, the Pass-Through Rate for the Class X-2 Certificates will be 0%. (9) DBRS attaches the letter m (market risk) to a rated security where there is the potential for significant volatility in returns as a result of non-credit factors, which are not considered in the evaluation of a rating. See Ratings. The Offered Certificates will be purchased from the Depositor by Bear, Stearns & Co. Inc. ( Bear Stearns ), Banc of America Securities LLC ( Banc of America Securities ) and Merrill Lynch, Pierce, Fenner & Smith Incorporated ( Merrill Lynch and, together with Bear Stearns and Banc of America Securities, the Initial Purchasers ), subject to certain conditions. The Offered Certificates will be offered by the Initial Purchasers from time to time in negotiated transactions or otherwise at varying prices to be determined at time of sale. The Offered Certificates will be offered by the Initial Purchasers subject to prior sale, when, as, and if issued to and accepted by the Initial Purchasers and subject to certain conditions. Bear Stearns and Banc of America Securities are acting as co-lead managers and joint bookrunners. Merrill Lynch is acting as co-manager. It is expected that the Offered Certificates (other than the Class X-2 Certificates) will be delivered in book-entry form through the facilities of The Depository Trust Company ( DTC ) in the United States and Clearstream Banking, société anonyme ( Clearstream ) and Euroclear Bank ( Euroclear ), as operator of the Euroclear System, in Europe on or about June 29, Bear, Stearns & Co. Inc. (Co-Lead Manager and Joint Bookrunner) Banc of America Securities LLC (Co-Lead Manager and Joint Bookrunner) Merrill Lynch & Co. (Co-Manager) April 28, 2005

2 The Offered Certificates will evidence direct interests in a trust fund (the Trust Fund ). The Trust Fund will consist primarily of the senior participation interest (the Trust Asset ) with respect to a single, recently originated, non-recourse first mortgage loan. The Trust Asset will be an asset of the Trust Fund. There also exists a junior participation interest (the Junior Participation and, together with the Trust Asset, the Mortgage Loan ) with respect to the Mortgage Loan. The Junior Participation will not be an asset of the Trust Fund. The Mortgage Loan has an unpaid principal balance as of the Cut-off Date of approximately $2,050,000,000. The Trust Asset has an unpaid principal balance as of the Cut-off Date of approximately $1,950,000,000. Elections will be made to treat designated portions of the Trust Fund as two separate real estate mortgage investment conduits (each a REMIC or, in the alternative, the Upper-Tier REMIC and the Lower-Tier REMIC, respectively) under the Internal Revenue Code of 1986, as amended (the Code ). The Class A-1, Class A-2, Class A-3, Class X-1, Class X-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class X-1B and Class Q Certificates will represent regular interests in the Upper-Tier REMIC. See Certain Federal Income Tax Consequences. Recourse for the satisfaction of indebtedness due under the Mortgage Loan for the payment and performance of all of the obligations and liabilities of the Mortgagors under the Mortgage Loan generally will be limited to the Mortgaged Properties and the related collateral. There will be no recourse to the assets of the Mortgagors (other than to the Mortgaged Properties, funds on deposit in the related accounts, and the other collateral), or to the controlling persons, officers, directors, trustees, beneficiaries, employees, agents, or affiliates of the Mortgagors, the Depositor or any other entity or their respective successors or assigns. It is expected that the Offered Certificates held by QIBs (other than the Class X-2 Certificates) will be eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages (PORTAL) System of the National Association of Securities Dealers, Inc. THE OFFERED CERTIFICATES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. SEE RISK FACTORS AND DESCRIPTION OF THE CERTIFICATES. THIS OFFERING MEMORANDUM HAS BEEN PREPARED SOLELY IN CONNECTION WITH AN OFFERING IN COMPLIANCE WITH AN EXEMPTION UNDER THE SECURITIES ACT FOR THE BENEFIT OF PROSPECTIVE INVESTORS INTERESTED IN OFFERED CERTIFICATES AND QUALIFIED TO PURCHASE OFFERED CERTIFICATES IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT. THE RECEIPT OF THIS OFFERING MEMORANDUM CONSTITUTES THE AGREEMENT ON THE PART OF THE RECIPIENT HEREOF THAT ANY REPRODUCTION OR DISTRIBUTION OF THIS OFFERING MEMORANDUM, IN WHOLE OR IN PART, OR DISCLOSURE OF ANY OF ITS CONTENTS TO ANY OTHER PERSON OR ITS USE FOR ANY PURPOSE OTHER THAN TO EVALUATE THE POTENTIAL PURCHASE OF OFFERED CERTIFICATES DESCRIBED HEREIN IS STRICTLY PROHIBITED. THE UNDERTAKINGS AND PROHIBITIONS SET FORTH IN THE PRECEDING SENTENCE ARE INTENDED FOR THE BENEFIT OF THE DEPOSITOR AND MAY BE ENFORCED BY THE DEPOSITOR. THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM HAS BEEN FURNISHED BY THE DEPOSITOR, THE MORTGAGORS, THE MARYLAND OWNER AND IN CERTAIN INSTANCES REPRODUCED FROM APPRAISALS, ENVIRONMENTAL AND ENGINEERING REPORTS, MORTGAGOR FINANCIAL AND OPERATING STATEMENTS, AND SIMILAR SOURCES IDENTIFIED HEREIN. THE DEPOSITOR ACCEPTS RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM. TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE DEPOSITOR, THE INFORMATION IN THIS OFFERING MEMORANDUM IS IN ACCORDANCE WITH THE FACTS AND DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION. THE INITIAL PURCHASERS HAVE ii

3 NOT MADE ANY INDEPENDENT INVESTIGATION OF SUCH INFORMATION AND MAKE NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY SUCH INFORMATION. THIS OFFERING MEMORANDUM CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF THE LOAN DOCUMENTS AND CERTAIN TERMS OF THE TRUST AND SERVICING AGREEMENT, BUT REFERENCE IS MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH WILL BE MADE AVAILABLE BY THE DEPOSITOR UPON REQUEST, FOR THE COMPLETE INFORMATION CONTAINED THEREIN. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE. DOCUMENTS INCORPORATED BY REFERENCE IN THIS OFFERING MEMORANDUM WILL NOT BE DEEMED TO CONSTITUTE PART OF THE LISTING PARTICULARS FILED WITH THE IRISH STOCK EXCHANGE IN CONNECTION WITH THE LISTING OF THE CERTIFICATES. NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR OR THE INITIAL PURCHASERS. THE INFORMATION CONTAINED HEREIN IS AS OF THE DATE HEREOF AND SUBJECT TO CHANGE, COMPLETION OR AMENDMENT WITHOUT NOTICE. THE DELIVERY OF THIS OFFERING MEMORANDUM AT ANY TIME SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE HEREOF. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING MEMORANDUM AS INVESTMENT, LEGAL OR TAX ADVICE. EACH INVESTOR SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO THE LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS OF A PURCHASE OF OFFERED CERTIFICATES. NEITHER THE DEPOSITOR NOR THE INITIAL PURCHASERS ARE MAKING ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF THE OFFERED CERTIFICATES REGARDING THE LEGALITY OF AN INVESTMENT THEREIN BY SUCH OFFEREE OR PURCHASER UNDER APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS. THE DISTRIBUTION OF THIS OFFERING MEMORANDUM AND THE OFFER AND SALE OF THE OFFERED CERTIFICATES MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS INTO WHOSE POSSESSION THIS OFFERING MEMORANDUM OR ANY OF THE OFFERED CERTIFICATES COME MUST INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH RESTRICTIONS. SEE PLAN OF PLACEMENT. EACH PURCHASER OF THE OFFERED CERTIFICATES MUST COMPLY WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN WHICH IT PURCHASES, OFFERS OR SELLS THE OFFERED CERTIFICATES OR POSSESSES OR DISTRIBUTES THIS OFFERING MEMORANDUM AND MUST OBTAIN ANY CONSENT, APPROVAL OR PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF OFFERED CERTIFICATES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS OR SALES, AND NEITHER THE DEPOSITOR NOR THE INITIAL PURCHASERS SHALL HAVE ANY RESPONSIBILITY THEREFOR. THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE OFFERED CERTIFICATES TO ANY PERSON IN ANY JURISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE OFFERED CERTIFICATES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE iii

4 ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. IN MAKING AN INVESTMENT DECISION REGARDING THE OFFERED CERTIFICATES, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE OFFERING IS BEING MADE ON THE BASIS OF THIS OFFERING MEMORANDUM. ANY DECISION TO PURCHASE OFFERED CERTIFICATES MUST BE BASED ON THE INFORMATION CONTAINED HEREIN. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, ANY PERSON MAY DISCLOSE TO ANY AND ALL OTHER PERSONS, WITHOUT LIMITATION OF ANY KIND, THE FEDERAL, STATE OR LOCAL INCOME TAX TREATMENT AND TAX STRUCTURE OF THE CERTIFICATES AND THE TRUST FUND, ANY FACT THAT MAY BE RELEVANT TO UNDERSTANDING THE FEDERAL, STATE OR LOCAL TAX TREATMENT OR TAX STRUCTURE OF THE CERTIFICATES AND THE TRUST FUND, AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) RELATING TO SUCH FEDERAL, STATE OR LOCAL TAX TREATMENT OR TAX STRUCTURE OTHER THAN THE NAMES OF THE PARTIES OR ANY OTHER PERSON NAMED HEREIN AND INFORMATION THAT WOULD PERMIT THE IDENTIFICATION OF THE PARTIES OR SUCH OTHER PERSON. NOTICE TO FLORIDA RESIDENTS WHERE SALES ARE MADE TO FIVE OR MORE PERSONS IN FLORIDA (EXCLUDING QUALIFIED INSTITUTIONAL BUYERS WITHIN THE MEANING OF SEC RULE 144A AND CERTAIN OTHER INSTITUTIONAL PURCHASERS DESCRIBED IN SECTION (7) OF THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT (THE FLORIDA ACT )), ANY SUCH SALE MADE PURSUANT TO SECTION (11) OF THE FLORIDA ACT SHALL BE VOIDABLE BY THE PURCHASER WITHIN THREE DAYS AFTER (A) RECEIPT OF THIS OFFERING MEMORANDUM, OR (B) THE FIRST PAYMENT OF MONEY OR OTHER CONSIDERATION TO THE DEPOSITOR, AN AGENT OF THE DEPOSITOR, OR AN ESCROW AGENT, WHICHEVER OCCURS LATER. NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER NEW HAMPSHIRE REVISED STATUTES ANNOTATED, CHAPTER 421-B ( RSA 421-B ), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. INVESTORS ARE DIRECTED TO READ NOTICE TO INVESTORS FOR A DESCRIPTION OF RESTRICTIONS ON THE RESALE, PLEDGE OR TRANSFER OF THE OFFERED CERTIFICATES. iv

5 NOTICE TO RESIDENTS OF THE UNITED KINGDOM THE TRUST FUND DESCRIBED IN THIS OFFERING MEMORANDUM IS A COLLECTIVE INVESTMENT SCHEME AS DEFINED IN THE FINANCIAL SERVICES AND MARKETS ACT 2000 ( FSMA ) OF THE UNITED KINGDOM. IT HAS NOT BEEN AUTHORIZED, OR OTHERWISE RECOGNIZED OR APPROVED BY THE UNITED KINGDOM S FINANCIAL SERVICES AUTHORITY AND, AS AN UNREGULATED COLLECTIVE INVESTMENT SCHEME, ACCORDINGLY CANNOT BE MARKETED IN THE UNITED KINGDOM TO THE GENERAL PUBLIC. THE DISTRIBUTION OF THIS OFFERING MEMORANDUM (A) IF MADE BY A PERSON WHO IS NOT AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT PERSONS WHO (1) ARE OUTSIDE THE UNITED KINGDOM, OR (2) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS, OR (3) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) THROUGH (D) ( HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC. ) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001 (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS FPO PERSONS ), AND (B) IF MADE BY A PERSON WHO IS AN AUTHORIZED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY AT, PERSONS WHO (1) ARE OUTSIDE THE UNITED KINGDOM, OR (2) HAVE PROFESSIONAL EXPERIENCE IN PARTICIPATING IN UNREGULATED COLLECTIVE INVESTMENT SCHEMES, OR (3) ARE PERSONS FALLING WITHIN ARTICLE 22(2)(A) THROUGH (D) ( HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC. ) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (PROMOTION OF COLLECTIVE INVESTMENT SCHEMES) (EXEMPTIONS) ORDER 2001 (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS PCIS PERSONS AND TOGETHER WITH THE FPO PERSONS, THE RELEVANT PERSONS ). THIS OFFERING MEMORANDUM MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS OFFERING MEMORANDUM RELATES, INCLUDING THE OFFERED CERTIFICATES, IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. POTENTIAL INVESTORS IN THE UNITED KINGDOM ARE ADVISED THAT ALL, OR MOST, OF THE PROTECTIONS AFFORDED BY THE UNITED KINGDOM REGULATORY SYSTEM WILL NOT APPLY TO AN INVESTMENT IN THE TRUST FUND AND THAT COMPENSATION WILL NOT BE AVAILABLE UNDER THE UNITED KINGDOM FINANCIAL SERVICES COMPENSATION SCHEME. FORWARD-LOOKING STATEMENTS IF AND WHEN INCLUDED IN THIS OFFERING MEMORANDUM OR IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THE WORDS EXPECTS, INTENDS, ANTICIPATES, ESTIMATES AND ANALOGOUS EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ANY SUCH STATEMENTS, WHICH MAY INCLUDE STATEMENTS CONTAINED IN RISK FACTORS, INHERENTLY ARE SUBJECT TO A VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS, COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER PREFERENCES AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE DEPOSITOR S CONTROL. ANY FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS OFFERING MEMORANDUM. THE DEPOSITOR EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING TO PROVIDE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN THE DEPOSITOR S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. v

6 INFORMATION AS TO PLACEMENT WITHIN THE UNITED STATES THIS OFFERING MEMORANDUM IS HIGHLY CONFIDENTIAL AND HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE OFFERING AND LISTING OF THE OFFERED CERTIFICATES DESCRIBED HEREIN. THIS OFFERING MEMORANDUM IS PERSONAL TO EACH OFFEREE TO WHOM IT HAS BEEN DELIVERED BY THE DEPOSITOR OR THE INITIAL PURCHASERS OR AFFILIATES THEREOF AND DOES NOT CONSTITUTE AN OFFER TO ANY OTHER PERSON OR TO THE PUBLIC GENERALLY TO SUBSCRIBE FOR OR OTHERWISE ACQUIRE THE OFFERED CERTIFICATES. EACH PROSPECTIVE PURCHASER, BY ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM, AGREES TO THE FOREGOING AND TO MAKE NO PHOTOCOPIES OF THIS OFFERING MEMORANDUM OR ANY DOCUMENTS ATTACHED HERETO. THE RECEIPT OF THIS OFFERING MEMORANDUM CONSTITUTES THE AGREEMENT ON THE PART OF THE RECIPIENT TO MAINTAIN THE CONFIDENTIALITY OF THE INFORMATION CONTAINED HEREIN. TRANSFERS OF THE OFFERED CERTIFICATES INVOLVING PERSONS IN THE UNITED STATES WILL BE SUBJECTED TO THE RESTRICTIONS DESCRIBED HEREIN AND IN THE TRUST AND SERVICING AGREEMENT. vi

7 TABLE OF CONTENTS PAGE SUMMARY OF OFFERING MEMORANDUM... 1 RISK FACTORS Risks Relating to the Mortgage Loan and the Mortgaged Properties Risks Relating to Real Estate Investments Risks Relating to Enforceability of Prepayment Premiums, Yield Maintenance Payments, Spread Maintenance Payments, Defeasance and Lockouts Provisions Risks Relating to Pass-Through Certificates DESCRIPTION OF THE MORTGAGED PROPERTIES General Operating Performance Additional Information Regarding the Mortgage Loan, the Trust Asset and the Mortgaged Properties The Extended Stay Market Third Party Reports DESCRIPTION OF THE MORTGAGE LOAN General Principal and Interest Clearing Accounts Cash Management Account Replacement Reserve Fund Tax and Insurance Escrow Fund Required Repair Fund and Special Reserve Fund Ground Lease Reserve Fund Excess Cash Flow Reserve Fund Security for the Mortgage Loan Representations and Warranties Certain Single Purpose Entity Mortgage Loan Covenants Prepayment Defeasance Release of Mortgaged Properties Casualty and Condemnation Mortgage Loan Events of Default Environmental Indemnity Financial Reporting Maintenance and Repair; Construction and Works; Compliance; Alterations; Capital Improvements Transfer Restrictions Hazard, Liability and Other Insurance Title Insurance PAGE DESCRIPTION OF THE PARTICIPATION AGREEMENT DESCRIPTION OF THE MEZZANINE LOANS Mezzanine Loans Intercreditor Agreement DESCRIPTION OF INTEREST RATE PROTECTION AGREEMENTS Cap/Swap Providers Interest Rate Cap Agreements Rate Swap Agreements DESCRIPTION OF THE MORTGAGORS Background The Blackstone Group Blackstone Real Estate Partners IV L.P Blackstone Capital Partners IV L.P DESCRIPTION OF THE MARYLAND OWNER AND THE MARYLAND BENEFICIARY DESCRIPTION OF THE OPERATING LESSEE AND OPERATING LEASE EXTENDED STAY AMERICA General Business Concept Blackstone s Extended Stay America Management Strategy DESCRIPTION OF THE MANAGER AND THE MANAGEMENT AGREEMENT Manager Management Agreement Compensation Termination Assignment Management Services Annual Business Plan Capital Expenses DESCRIPTION OF ASSIGNMENT OF MANAGEMENT AGREEMENT AND SUBORDINATION OF MANAGEMENT AGREEMENT Subordination Assignment Attornment DESCRIPTION OF THE FRANCHISE LICENSE DESCRIPTION OF ASSIGNMENT OF FRANCHISE AGREEMENT AND SUBORDINATION OF FRANCHISE AGREEMENT Subordination Assignment Attornment vii

8 DESCRIPTION OF THE CERTIFICATES General Distributions Voting Rights Reports to Certificateholders; Available Information Other Information Delivery, Form and Denomination Book-Entry Registration Individual Certificates Securities Legend Transfer Restrictions ERISA-Related Transfer Restrictions LISTING AND GENERAL INFORMATION DESCRIPTION OF THE DEPOSITOR DESCRIPTION OF THE TRUST AND SERVICING AGREEMENT Assignment of the Mortgage Loan Representations and Warranties of the Depositor Trust Asset Sellers Representations and Warranties; Repurchases The Servicer and the Special Servicer Responsibilities of the Servicer and Special Servicer Specially Serviced Loan Servicing Fees and Special Servicing Fees Servicing of the Mortgage Loan; Inspections Insurance Fidelity Bonds and Errors and Omissions Insurance Modification of the Loan Documents The Operating Advisor Flow of Funds; Accounts Withdrawals from the Collection Account Purchase of Defaulted Mortgage Loan Fair Value Purchase Option Sale of Foreclosed Properties Foreclosures Advances Appraisal Reductions Events of Default Under the Trust and Servicing Agreement Rights Upon Trust and Servicing Event of Default Evidence as to Compliance Certain Matters Regarding the Depositor, the Servicer and the Special Servicer Amendments Termination The Trustee Duties of the Trustee Trustee Fee The Irish Paying Agent Governing Law USE OF PROCEEDS YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS General Weighted Average Life Yield Sensitivity of the Class X-1 and Class X-2 Certificates CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOAN California Florida Texas Illinois Mortgages, Deeds to Secure Debt and Deeds of Trust Generally Foreclosure Environmental Risks Certain Laws and Regulations Rights of Redemption Anti-Deficiency Legislation Statutory Liabilities Enforceability of Certain Provisions Americans with Disabilities Act Bankruptcy Issues CERTAIN FEDERAL INCOME TAX CONSEQUENCES General Qualification as a REMIC Characterization of Investments in Offered Certificates Taxation of Offered Certificates Taxes That May Be Imposed on a REMIC Limitation on Deduction of Certain Expenses Taxation of Certain Foreign Investors Backup Withholding Reporting and Administrative Requirements CERTAIN STATE AND LOCAL TAX CONSIDERATIONS CERTAIN ERISA CONSIDERATIONS LEGAL INVESTMENT NOTICE TO INVESTORS PLAN OF PLACEMENT LEGAL MATTERS RATINGS ADDITIONAL INFORMATION INDEX OF SIGNIFICANT DEFINITIONS ANNEX A FORM OF INVESTMENT LETTER... A-1 viii

9 SUMMARY OF OFFERING MEMORANDUM The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Offering Memorandum. Capitalized terms used but not defined in this summary have the meanings given to them elsewhere in this Offering Memorandum. See Index of Significant Definitions. See Risk Factors for a description of certain risks and other special considerations relevant to an investment in the Offered Certificates. Depositor... Bear Stearns Commercial Mortgage Securities Inc., a Delaware corporation. Mortgagors... BRE/ESA Properties L.L.C. ( BRE/ESA ), a Delaware limited liability company, BRE/ESA FL Properties L.L.C. ( BRE/FL ), a Delaware limited liability company, BRE/ESA MD Borrower L.L.C. ( Maryland Borrower ), a Delaware limited liability company, BRE/ESA MN Properties L.L.C. ( BRE/MN ), a Delaware limited liability company, BRE/ESA PA Properties L.L.C. ( BRE/PA ), a Delaware limited liability company and BRE/ESA TX Properties L.P. ( BRE/TX ), a Delaware limited partnership. Each of the Mortgagors and the Maryland Owner were organized for the purpose of acquiring, holding and operating the Mortgaged Properties and borrowing pursuant to the Mortgage Loan (or, in the case of the Maryland Borrower, to act as borrower as described below). The Mortgagors and the Maryland Owner will not have any significant assets other than the Mortgaged Properties and the Interest Rate Protection Agreements. BRE/FL is the owner of 31 Mortgaged Properties in Florida. BRE/MN is the owner of 8 Mortgaged Properties located in Minnesota. BRE/PA is the owner of 12 Mortgaged Properties located in Pennsylvania. BRE/TX is the owner or ground lessee of 69 Mortgaged Properties located in Texas and North Carolina. BRE/ESA is the owner or ground lessee of the other 365 Mortgaged Properties (other than the Maryland Properties, which are owned by the Maryland Owner). All obligations of the Mortgagors under the Mortgage Loan are joint and several. Maryland Owner... BRE/ESA MD Properties Business Trust, a Delaware statutory trust ( Maryland Owner ). The Maryland Owner is the owner of 14 Mortgaged Properties located in Maryland (the Maryland Properties ). The Maryland Owner and BRE/ESA MD Beneficiary L.L.C. (the Maryland Beneficiary ) entered into an indemnity guaranty agreement with the Trust Asset Sellers to secure the full and prompt payment and performance of the obligations and liabilities of the Maryland Borrower under the Mortgage Note and the other Loan Documents. The obligations of the Maryland Owner are secured by certain security instruments which encumber the Maryland Properties. In addition, the Maryland Beneficiary entered into a pledge agreement in favor of the Trust Asset Sellers pursuant to which the Maryland Beneficiary granted the Trust Asset Sellers a first priority security interest in 100% of the equity interests in Maryland Owner as collateral security for the indemnity guaranty agreement. Operating Lessee... BRE/ESA Operating Lessee Inc., a Delaware corporation (the Operating Lessee ), organized for the purpose of operating all of the Mortgaged Properties pursuant to an operating lease (the Operating Lease ) among the Operating Lessee, the Mortgagors (other than the Maryland Borrower) and the Maryland Owner. The Operating Lessee does not manage the Mortgaged Properties. The Mortgaged Properties 1

10 are managed by the Manager. As additional collateral for the obligations of the Mortgagors and the Maryland Owner under the Mortgage Loan, the Operating Lessee pledged its leasehold interests in and to the Mortgaged Properties and granted a first priority security interest in its personal property, if any, at the Mortgaged Properties. See Description of the Operating Lessee and Operating Lease. The Operating Lessee has engaged the Manager to manage the Mortgaged Properties. See Description of the Manager and the Management Agreement. Servicer... Bank of America, N.A., a national banking association ( Bank of America ). The Servicer will be required to perform the customary functions of a servicer of commercial mortgage loans, including collection of payments from the Mortgagors, remittance of payments received in respect of the Mortgage Loan into the Collection Account for the benefit of the Certificateholders and the Junior Participant, transfer of funds to be used to make distributions on the Certificates from the Collection Account to the Distribution Account on the business day immediately preceding each Distribution Date (each such date, a Servicer Remittance Date ) and making certain advances in accordance with its obligations under the Trust and Servicing Agreement. See Description of the Trust and Servicing Agreement Responsibilities of the Servicer and Special Servicer, Flow of Funds; Accounts and Advances. The principal compensation to be paid to the Servicer in respect of its servicing activities will be the Servicing Fee. The Servicing Fee will be payable monthly from payments on the Mortgage Loan allocable to interest and will accrue at a rate, that, when added to the rate at which the Trustee Fee is calculated, equals % per annum (the Administrative Fee Rate ), calculated on the basis of a 360-day year and the actual number of days in the related Interest Accrual Period and computed on the basis of the same principal amount and for the same period respecting which any related interest payment on the Mortgage Loan is computed, using the same actual/360 interest convention as the Mortgage Loan. See Description of the Trust and Servicing Agreement Servicing Fees and Special Servicing Fees. Special Servicer... Bank of America will initially act as the Special Servicer. The Special Servicer will be responsible for servicing the Mortgage Loan in the event that it becomes a Specially Serviced Loan. See Description of the Trust and Servicing Agreement Specially Serviced Loan. The compensation to be paid to the Special Servicer in respect of its servicing activities will include a Special Servicing Fee and may include a Liquidation Fee or Work-Out Fee under certain circumstances, as described under Description of the Trust and Servicing Agreement Servicing Fees and Special Servicing Fees. The Special Servicing Fee will be payable monthly from payments on the Mortgage Loan (to the extent that it is a Specially Serviced Loan) allocable to interest and will accrue at a rate of 0.25% per annum (25 basis points) (the Special Servicing Fee Rate ), computed on the basis of a 360-day year and the actual number of days in the related Interest Accrual Period and computed on the basis of the same principal amount and for the same period respecting which any related interest payment on the Mortgage Loan is computed, using the same actual/360 interest convention as the Mortgage Loan. The Special Servicer may be removed without cause by the Operating Advisor as described 2

11 herein. See Description of the Trust and Servicing Agreement The Servicer and the Special Servicer and Servicing Fees and Special Servicing Fees and The Operating Advisor. Trustee... Wells Fargo Bank, N.A., a national banking association. The Trustee will be the holder of the Trust Asset, the mortgagee of the Mortgages and the secured party or beneficiary under the deeds of trust, as applicable, and the secured party or beneficiary under other security and related documents upon transfer of the Trust Asset, the Mortgages, and such other documents by the Depositor to the Trust Fund. See Description of the Trust and Servicing Agreement Duties of the Trustee. The Trustee is appointed paying agent, authenticating agent (in such capacity, the Authenticating Agent ), certificate registrar (in such capacity, the Certificate Registrar ), and transfer agent (in such capacity, the Transfer Agent ) under the Trust and Servicing Agreement. The principal compensation to be paid to the Trustee in respect of its services under the Trust and Servicing Agreement will be the Trustee Fee. The Trustee Fee will be payable monthly from payments on the Mortgage Loan allocable to interest and will accrue at a rate, that, when added to the rate at which the Servicing Fee is calculated, equals the Administrative Fee Rate, calculated on the basis of a 360-day year and the actual number of days in the related Interest Accrual Period and computed on the basis of the same principal amount and for the same period respecting which any related interest payment on the Mortgage Loan is computed. See Description of the Trust and Servicing Agreement Trustee Fee. Manager... The Mortgaged Properties are managed by ESA Services L.L.C. (the Manager ), a wholly owned subsidiary of Homestead Village Management, LLC ( HVM ) under a management agreement (the Management Agreement ) as described under Description of the Manager and the Management Agreement. Closing Date... On or about June 29, Cut-off Date... June 29, Use of Proceeds... The Depositor will use the net proceeds from the sale of the Offered Certificates to the Initial Purchasers to purchase the Trust Asset from Bear Stearns Commercial Mortgage, Inc. and Bank of America, N.A. (the Trust Asset Sellers ). Trust Fund... The Certificates represent in the aggregate the entire beneficial ownership interest in the Trust Fund, which consists of: (A) the senior participation interest (the Trust Asset ) in (i) the Mortgage Loan, (ii) payments under the Mortgage Loan, (iii) security for the Mortgage Loan, including cross-collateralized and cross-defaulted mortgages, deeds of trust or similar security instruments (each, a Mortgage ) creating first-priority liens on the Mortgaged Properties, the Interest Rate Protection Agreements and the Reserve Accounts and any United States government obligations pledged in respect of the defeasance of the Mortgage Loan, (iv) the other documents executed by the Mortgagors, the Maryland Owner and the Operating Lessee in connection with the closing of the Mortgage Loan (collectively, the Loan Documents ), and (v) any Mortgaged Property acquired on 3

12 behalf of the Trust Fund and the Junior Participation through foreclosure or deed in lieu of foreclosure (upon acquisition, a Foreclosed Property ) and any funds deposited into any account (a Foreclosed Property Account ) established in connection with Foreclosed Properties, and (B) the interest of the Trust Asset in funds or assets from time to time on deposit in the Collection Account and the Distribution Account. The Trustee also will have security interests for the benefit of the Certificateholders and the Junior Participation in the funds or assets from time to time on deposit in the Clearing Accounts, the Cash Management Account, the Reserve Accounts and certain other assets of the Mortgagors, the Maryland Owner and the Operating Lessee (including the Interest Rate Protection Agreements). See Description of the Certificates General. There also exists a junior participation interest (the Junior Participation ) with respect to the Mortgage Loan. The Junior Participation will not be an asset of the Trust Fund. As used in this Offering Memorandum, the Mortgage Loan refers to the Trust Asset together with the Junior Participation. All principal payments due on the Mortgage Loan will be allocated between the Trust Asset and the Junior Participation, as described below under Mortgage Loan Payments and under Description of the Participation Agreement. As of the date of this Offering Memorandum, the Junior Participation is held by the Trust Asset Sellers; however, it is anticipated that the Trust Asset Sellers will sell the Junior Participation to an unaffiliated thirdparty. For a description of the transfer restrictions relating to the Junior Participation, see Description of the Participation Agreement. Mortgage Loan Payments General... For purposes of calculating interest and other amounts payable on the Mortgage Loan, the Mortgage Loan will be divided into a total of 14 components (each, a Mortgage Loan Component and, together, the Mortgage Loan Components ), each corresponding to one Class of Principal Balance Certificates (other than the Class A-2A Mortgage Loan Component and the Class A-2B Mortgage Loan Component, which, together, correspond to the Class A-2 Certificates, and other than the Class L Mortgage Loan Component, which corresponds to the Junior Participation): the Class A-1 Mortgage Loan Component, the Class A-2A Mortgage Loan Component, the Class A-2B Mortgage Loan Component, the Class A-3 Mortgage Loan Component, the Class B Mortgage Loan Component, the Class C Mortgage Loan Component, the Class D Mortgage Loan Component, the Class E Mortgage Loan Component, the Class F Mortgage Loan Component, the Class G Mortgage Loan Component, the Class H Mortgage Loan Component, the Class J Mortgage Loan Component, the Class K Mortgage Loan Component and the Class L Mortgage Loan Component. The Class A-1 Mortgage Loan Component, Class A-2A Mortgage Loan Component, Class K Mortgage Loan Component and Class L Mortgage Loan Component are also known herein collectively as the Floating Rate Mortgage Loan Components. The Class A-2B Mortgage Loan Component is also known herein as the Swap Mortgage Loan Component and, together with the Floating Rate Mortgage Loan Components, the Floating Rate and Swap Mortgage Loan 4

13 Components. The Class A-3 Mortgage Loan Component, the Class B Mortgage Loan Component, the Class C Mortgage Loan Component, the Class D Mortgage Loan Component, the Class E Mortgage Loan Component, the Class F Mortgage Loan Component, the Class G Mortgage Loan Component, the Class H Mortgage Loan Component and the Class J Mortgage Loan Component are also known herein collectively as the Fixed Rate Mortgage Loan Components. Each Mortgage Loan Component (other than the Class A-2A Mortgage Loan Component, Class A-2B Mortgage Loan Component, and Class L Mortgage Loan Component) has a principal balance as of the Cut-off Date equal to the initial Certificate Balance for the corresponding Class of Principal Balance Certificates. The principal balance of the Class A-2A Mortgage Loan Component as of the Cut-off Date is approximately $24,000,000. The principal balance of the Class A-2B Mortgage Loan Component as of the Cut-off Date is approximately $665,500,000. The principal balance of the Class L Mortgage Loan Component as of the Cut-off Date is approximately $100,000,000, which is equal to the principal balance of the Junior Participation as of the Cut-off Date. Payments on the Mortgage Loan are required to be made on the 11 th day of each calendar month (or if such date is not a business day, the preceding business day) (each, a Due Date ). Principal Payments... There are no scheduled payments of principal due on the Fixed Rate Mortgage Loan Components prior to the Fixed Rate Maturity Date. There are no scheduled payments of principal due on the Floating Rate and Swap Mortgage Loan Components prior to the Initial Floating Rate and Swap Maturity Date. The following is a description of how the various categories of principal payments under the Mortgage Loan are required to be allocated among the Mortgage Loan Components pursuant to the Loan Agreement. Voluntary principal prepayments on the Mortgage Loan associated with the release of one or more Mortgaged Properties (excluding any amounts used to defease all or any portion of the Fixed Rate Mortgage Loan Components) (see Description of the Mortgage Loan Principal and Interest ) will be applied in reduction of (i) the principal balances of the Mortgage Loan Components other than the Class L Mortgage Loan Component (the Trust Asset Mortgage Loan Components ) and (ii) the principal balance of the Class L Mortgage Loan Component (the Junior Participation Mortgage Loan Component ), pro rata, based on the principal balance of the undefeased portion of the Trust Asset Mortgage Loan Components, on the one hand, and the principal balance of the Junior Participation Mortgage Loan Component, on the other hand. Amounts applied in reduction of the Trust Asset Mortgage Loan Components will be applied sequentially in the following order: first, in reduction of the Class A-1 Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; second, in reduction of the Class A-2A Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; third, in reduction of the Class A-2B Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; and fourth, provided that the Fixed Rate Mortgage Loan Components have been defeased in their entirety as 5

14 described under Defeasance, in reduction of the Class K Mortgage Loan Component until such Mortgage Loan Component is reduced to zero. Notwithstanding the foregoing, if the Fixed Rate Mortgage Loan Components are not defeased, no such prepayment is permitted to be made in reduction of the Class K Mortgage Loan Component. Amounts applied in reduction of the principal balance of the Mortgage Loan in connection with a voluntary prepayment (excluding any amounts used to defease all or any portion of the Fixed Rate Mortgage Loan Components) (i) not associated with the release of an individual Mortgaged Property and (ii) other than an Excess Cash Flow Prepayment (a Deleveraging Prepayment ) (see Description of the Mortgage Loan Prepayment ) as well as in connection with an Excess Cash Flow Prepayment (see Description of the Mortgage Loan Excess Cash Flow Reserve Fund ) will be applied in reduction of the principal balances of the Floating Rate and Swap Mortgage Loan Components in the following reverse sequential order: first, in reduction of the Junior Participation Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; second, in reduction of the Class K Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; third, in reduction of the Class A-2B Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; fourth, in reduction of the Class A-2A Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; and fifth, in reduction of the Class A-1 Mortgage Loan Component until such Mortgage Loan Component is reduced to zero. Involuntary principal prepayments made in connection with a Casualty or Condemnation will be applied to reduce the principal balances of (i) the Trust Asset Mortgage Loan Components and (ii) the Junior Participation Mortgage Loan Component, pro rata, based on the principal balance of the undefeased portion of the Trust Asset Mortgage Loan Components, on the one hand, and the principal balance of the Junior Participation Mortgage Loan Component, on the other hand. Amounts applied to reduce the principal balance of the Trust Asset Mortgage Loan Components will be applied sequentially in reduction of all of the Trust Asset Mortgage Loan Components: first, in reduction of the Class A-1 Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; second, in reduction of the Class A-2A Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; third, in reduction of the Class A-2B Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; fourth, in reduction of the Class A-3 Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; fifth, in reduction of the Class B Mortgage Loan Component until such Mortgage Loan Component is reduced to zero; and similarly thereafter in alphabetical order to each other Trust Asset Mortgage Loan Component until such Mortgage Loan Component is reduced to zero. If a Fixed Rate Mortgage Loan Component or any portion thereof has been defeased, no involuntary principal prepayments in connection with a Casualty or Condemnation may be allocated to such Fixed Rate Mortgage Loan Component or portion thereof. The Floating Rate and Swap Balloon Payment (see Loan Maturity Dates below) will be applied in reduction of the principal balance of the Floating Rate and Swap Mortgage Loan Components in 6

15 alphabetical (and numerical, if applicable) sequential order; provided, however, that if the payment of the Floating Rate and Swap Balloon Payment is accompanied by a release of any of the Mortgaged Properties, the payment of the Floating Rate and Swap Balloon Payment will be applied in the same manner as voluntary prepayments on the Mortgage Loan associated with a release of one or more Mortgaged Properties, as described above, and will be subject to the same restrictions as such voluntary prepayments. Notwithstanding any of the allocations listed above, principal payments made on the Mortgage Loan during the occurrence and continuation of a Sequential Pay Event will be applied in reduction of all of the Mortgage Loan Components, including the Fixed Rate Mortgage Loan Components, in sequential order, but pro rata between the Class A-2A Mortgage Loan Component, Class A-2B Mortgage Loan Component and Class A-3 Mortgage Loan Component. No prepayments, other than as a result of the occurrence and continuation of a Sequential Pay Event or as a result of a Casualty and Condemnation, are permitted to be made to any Fixed Rate Mortgage Loan Component under the Loan Agreement. However, the Mortgagors may voluntarily defease all or any portion of the Fixed Rate Mortgage Loan Components beginning on the date that is two years after the Closing Date. See Description of the Mortgage Loan Principal and Interest, Excess Cash Flow Reserve Fund and Prepayment. Interest Payments... The amount of interest payable on each Due Date with respect to any Mortgage Loan Component will be equal to the interest which is scheduled to accrue on such Mortgage Loan Component during the related Interest Accrual Period, computed using the balance as of the end of the Due Date immediately preceding the start of the Interest Accrual Period. The Interest Accrual Period for all of the Mortgage Loan Components is the same as the Interest Accrual Period for the Certificates, except that the first Interest Accrual Period for the Certificates will commence on the Closing Date. The Interest Accrual Period with respect to any Due Date or Distribution Date will be the period commencing on and including the 14 th day of the calendar month immediately preceding the month in which such Due Date or Distribution Date occurs to and including the 13 th day of the calendar month in which such Due Date or Distribution Date occurs, except that the first Interest Accrual Period for the Certificates will commence on the Closing Date. Interest (other than Default Interest) will be payable on each Mortgage Loan Component at the following approximate per annum rates (each, a Mortgage Loan Component Rate ): 7

16 Mortgage Loan Component Mortgage Loan Component Rate Class A-1... LIBOR plus % Class A-2A... LIBOR plus % Class A-2B... LIBOR plus % Class A % Class B % Class C % Class D % Class E % Class F % Class G % Class H % Class J % Class K... LIBOR plus % Class L... LIBOR plus % Interest on all of the Mortgage Loan Components, whether Floating Rate and Swap Mortgage Loan Components or Fixed Rate Mortgage Loan Components, will be computed on the basis of a 360-day year and the actual number of days in the related Interest Accrual Period. Upon the occurrence of a Mortgage Loan Event of Default, payments of interest, principal and any other amounts required to be paid by the Mortgagors will accrue interest at a default rate of interest per annum (the Default Rate ) equal, with respect to each Mortgage Loan Component, to the lesser of (a) 5% in excess of the applicable interest rate on such Mortgage Loan Component or (b) the maximum amount permitted by law. Loan Maturity Dates... The maturity date with respect to the Fixed Rate Mortgage Loan Components is May 11, 2009 (the Fixed Rate Maturity Date ). All of the remaining principal balance of the Fixed Rate Mortgage Loan Components will be due and payable by the Mortgagors on the Fixed Rate Mortgage Loan Components on the Fixed Rate Maturity Date. The maturity date with respect to the Floating Rate and Swap Mortgage Loan Components is May 11, 2007 (the Initial Floating Rate and Swap Maturity Date ), subject to two successive one-year extensions at the Mortgagors option if there is no Mortgage Loan Event of Default at the time such option is exercised (each, resulting in an Extended Floating Rate and Swap Maturity Date ). The Floating Rate and Swap Mortgage Loan Components may only be extended collectively but not separately and extension is subject to certain conditions described herein, including obtaining replacement interest rate protection agreements through the Extended Floating Rate and Swap Maturity Date. When used herein, Floating Rate and Swap Maturity Date will refer to the Initial Floating Rate and Swap Maturity Date, as extended as described above. When used herein, Maturity Date will refer to the Floating Rate and Swap Maturity Date and/or the Fixed Rate Maturity Date, as applicable. All of the remaining principal balance of the Floating Rate and Swap Mortgage Loan Components (the Floating Rate and Swap Balloon Payment ) will be due and payable by the Mortgagors on the Floating Rate and Swap Mortgage Loan Components on the Initial Floating Rate 8

17 and Swap Maturity Date, unless extended as described herein, in which case such amounts will be due and payable by the Mortgagors on the Extended Floating Rate and Swap Maturity Date (the Floating Rate and Swap Balloon Payment together with the principal payment scheduled to be due on the Fixed Rate Maturity Date, the Balloon Payments ). Mortgaged Properties and Other Collateral... The Mortgage Loan is secured by first priority, cross-defaulted, and cross-collateralized Mortgages on 485 hotels, including each Mortgagor s fee simple and/or leasehold interest and the Maryland Owner s fee simple interest in each of the parcels on which such hotels are situated (collectively, the Mortgaged Properties ), the Operating Lessee s leasehold interest in each of the Mortgaged Properties and ownership interest, if any, in the personal property at the Mortgaged Properties, an assignment of leases and rents with respect to each of the Mortgaged Properties, certain contract rights of the Mortgagors and the Operating Lessee (including an assignment of the Management Agreement and the Franchise Agreement), the Property Accounts, the Clearing Accounts, the Cash Management Account, the Reserve Accounts, and the Interest Rate Protection Agreements (together with the Mortgaged Properties, the Collateral ). See Description of the Mortgaged Properties. Reserve Accounts... Under the terms of the Loan Documents, the Mortgagors and the Maryland Owner are required to maintain the following reserve accounts (collectively, the Reserve Accounts ) with the Servicer: a) an ongoing replacement reserve fund (the Replacement Reserve Fund ) (or in lieu of or in substitution of any portion of the Replacement Reserve Fund, one or more letters of credit) for replacement of fixtures, furniture and equipment and other replacements and repairs into which the Mortgagors and the Maryland Owner are required to deposit on a monthly basis, an amount equal to 5% of gross income from operations of the Mortgaged Properties for the month that is the second month preceding the month of the applicable Due Date; b) an ongoing tax and insurance escrow fund (the Tax and Insurance Escrow Fund ) for taxes and other charges and insurance premiums payable with respect to the Mortgaged Properties into which the Mortgagors and the Maryland Owner are required to deposit on a monthly basis 1/12 of the annual taxes, assessments and water and sewer charges and annual insurance premiums to be payable with respect to the Mortgaged Properties, as estimated by the Servicer; c) an upfront required repair fund in the original amount of $2,115,628 (the Required Repair Fund ) for certain repairs, capital improvements and replacements identified in the Loan Documents and a reserve fund (the Special Reserve Fund ) into which the Mortgagors and Maryland Owner, subject to certain conditions in the Loan Agreement, are required to deposit an amount necessary to correct certain defects identified in the Loan Documents if such defects are not remedied within 60 days from the closing date of the Mortgage Loan; 9

18 d) an ongoing ground lease reserve fund (the Ground Lease Reserve Fund ) for ground rents and other charges payable with respect to two Mortgaged Properties that are subject to ground leases into which the Mortgagors and the Maryland Owner are required to deposit on a monthly basis an amount equal to 1/12 of the ground rents and other charges due under such ground leases for the next 12 months, as estimated by the Servicer; and e) upon the occurrence of a Mortgage Loan Event of Default, a bankruptcy action involving the Manager, an event of default under any of the Mezzanine Loan documents or a Debt Yield Event, an excess cash flow reserve fund (the Excess Cash Flow Reserve Fund ) which will be held by the Servicer as additional security for the Mortgage Loan into which the Mortgagors will be required to deposit Required Excess Cash from remaining amounts on deposit in the Cash Management Account after payment of all escrows, reserves, debt service and certain other amounts required to be made in accordance with the Loan Documents. See Description of the Mortgage Loan Replacement Reserve Fund, Tax and Insurance Escrow Fund, Required Repair Fund and Special Reserve Fund, Ground Lease Reserve Fund and Excess Cash Flow Reserve Fund. Interest Rate Protection... The Loan Agreement requires that the Mortgagors enter into (i) one or more interest rate cap agreements with respect to each Floating Rate Mortgage Loan Component (each, an Interest Rate Cap Agreement ) and (ii) one or more rate swap agreements (each, a Rate Swap Agreement and, together with the Interest Rate Cap Agreements, the Interest Rate Protection Agreements ) with respect to the Swap Mortgage Loan Component, with one or more interest rate cap or swap providers (each, a Cap/Swap Provider ). The Interest Rate Protection Agreements are required to be in effect until the Initial Floating Rate and Swap Maturity Date. In the event that the Mortgagors choose to exercise their option to extend the maturity date of the Floating Rate and Swap Mortgage Loan Components, the Mortgagors will be required, prior to the then effective Floating Rate and Swap Maturity Date, to obtain and deliver to the mortgagee one or more replacement interest rate protection agreements with maturity dates not earlier than each Extended Floating Rate and Swap Maturity Date and with such terms as stated in the Loan Agreement. Each Cap/Swap Provider must either (i) have and maintain, until the expiration of the applicable Interest Rate Protection Agreement, a long-term unsecured debt rating of not less than AA from S&P, Fitch (if such Cap/Swap Provider is rated by Fitch) and DBRS (if such Cap/Swap Provider is rated by DBRS) and Aa2 from Moody s, which rating will not include a t or otherwise reflect a termination risk, or (ii) is otherwise acceptable to each Rating Agency, as evidenced by written confirmation from the Rating Agencies that such counterparty would not cause a downgrade, withdrawal or qualification of the then current ratings assigned to any of the Certificates. In connection with the origination of the Mortgage Loan, the Mortgagors entered into an Interest Rate Cap Agreement and a Rate Swap Agreement with Bear Stearns Financial Products, Inc. ( BSFP ), an affiliate of Bear Stearns Commercial Mortgage, Inc., one 10

19 of the Trust Asset Sellers, and the Mortgagors entered into a Rate Swap Agreement with Bank of America, N.A., the entity that is the other Trust Asset Seller. See Description of the Interest Rate Protection Agreements Interest Rate Cap Agreements and Rate Swap Agreements. BSFP is currently rated Aaa by Moody s and AAA by S&P. The long-term certificates of deposit rating of Bank of America, N.A. by Moody s is Aa1. The long-term senior unsecured debt rating of Bank of America, N.A. by S&P is AA- and by DBRS is AA. The Interest Rate Protection Agreements with BSFP and Bank of America, N.A. terminate on May 11, Pursuant to the collateral assignment of the Interest Rate Protection Agreements, BSFP has agreed to make all payments due under the Interest Rate Cap Agreements and BSFP and Bank of America, N.A. have agreed to make all payments due under the Rate Swap Agreements, to the Cash Management Account. The obligations and liabilities of BSFP and Bank of America, N.A. under their respective Interest Rate Protection Agreements are several and not joint. Pursuant to the Loan Agreement, on or before each Due Date and on or prior to the earlier of (i) the payment in full of the Floating Rate Mortgage Loan Components and (ii) the Floating Rate and Swap Maturity Date, the Cap/Swap Providers under the Interest Rate Cap Agreements will be required to make a payment to the Servicer on behalf of the Mortgagors such that if LIBOR exceeds the specified per annum strike rate for such Floating Rate Mortgage Loan Component, as described under Description of the Interest Rate Protection Agreements Interest Rate Cap Agreements, the Cap/Swap Providers will be obligated to pay the amount of interest accrued on the principal amount of the Floating Rate Mortgage Loan Components at a rate equal to the excess of LIBOR over the applicable strike rate. The effect of the Interest Rate Cap Agreements will be to limit the maximum interest rate exposure of the Mortgagors on the Floating Rate Mortgage Loan Components with respect to increases in LIBOR through the Floating Rate and Swap Maturity Date (including any Extended Floating Rate and Swap Maturity Date). Pursuant to the Loan Agreement, on or before each Due Date and on or prior to the earlier of (i) the payment in full of the Swap Mortgage Loan Component and (ii) the Floating Rate and Swap Maturity Date, the Cap/Swap Providers under the Rate Swap Agreements will receive from the Mortgagors a monthly payment equal to the interest accrued on the notional amount of the Swap Mortgage Loan Component at 3.18% and the Mortgagors will receive in return from the Cap/Swap Providers a monthly payment equal to the interest accrued on the notional amount of the Swap Mortgage Loan Component at one-month LIBOR, as described under Description of the Interest Rate Protection Agreements Interest Rate Cap Agreements. The effect of the Rate Swap Agreements will be to fix the interest rate exposure of the Mortgagors at 3.18%, with respect to the Swap Mortgage Loan Component through the Initial Floating Rate and Swap Maturity Date and any subsequent term if renewed by the Mortgagors pursuant to the Loan Documents. The Mortgagors have pledged their interest in the benefits of the Interest Rate Protection Agreements and are required to pledge their interest in any replacement interest rate protection agreements, as 11

20 security for the Mortgage Loan. Such security interest will be assigned to the Trustee for the benefit of the Certificateholders and the Junior Participant. See Description of Interest Rate Protection Agreements. Debt Service Coverage Ratio... Based on the scheduled interest payments due on the Mortgage Loan or Trust Asset, as applicable, for the first 12 months after the Closing Date assuming a LIBOR rate of 1.28%, the debt service coverage ratio calculated using Actual Net Cash Flow (as defined herein adjusted for a deduction of 6% of gross revenues for management, franchise, and marketing fees) for the 12 month period ending on December 31, 2003 is approximately 2.26x, with respect to the Mortgage Loan ( Actual 2003 Mortgage Loan DSCR ) and approximately 2.38x, with respect to the Trust Asset ( Actual 2003 Trust Asset DSCR ) and the debt service coverage ratio using Underwritten Net Cash Flow (as defined herein) is approximately 3.12x, with respect to the Mortgage Loan ( Underwritten Mortgage Loan DSCR ) and approximately 3.27x, with respect to the Trust Asset ( Underwritten Trust Asset DSCR ). Initial Loan-to-Value Ratio... The loan-to-value ratio for the Mortgage Loan as of the Cut-off Date is approximately 58.6%. The loan-to-value ratio for the Trust Asset as of the Cut-off Date is approximately 55.7 %. Each of these loan-to-value ratios represents a fraction, expressed as a percentage, the numerator of which is $2,050,000,000, with respect to the Mortgage Loan, or $1,950,000,000, with respect to the Trust Asset, representing the principal amount of the Mortgage Loan or the Trust Asset, as applicable, as of the Cut-off Date, and the denominator of which is $3,500,000,000, the aggregate appraised value of the portfolio of Mortgaged Properties as determined by appraisals as of April 2004, which were performed by Cushman & Wakefield, Inc. The approximate Trust Asset loan-to-value ratio as of the Cut-off Date for each Class of Principal Balance Certificates (including the Certificate Balances of all Classes senior to such Class) is approximately as follows: Cut-off Date Trust Asset Class Loan-to-Value Ratio Class A % Class A-2/Class A % Class B % Class C % Class D % Class E % Class F % Class G % Class H % Class J % Class K % Prepayments... Voluntary prepayment of the Floating Rate and Swap Mortgage Loan Components is prohibited prior to May 11, 2005 (the Prepayment Release Date ). No voluntary prepayment may be made on any Fixed Rate Mortgage Loan Component, provided that the Mortgagors may voluntarily defease all or any portion of the Fixed Rate Mortgage Loan Components beginning two years after the Closing Date (see Defeasance below). On and after the Prepayment Release Date, so long as no Mortgage Loan Event of Default exists, the Mortgagors may prepay the Floating Rate and Swap Mortgage Loan Components in whole or in part upon 7 business days written notice to the Servicer, 12