Diversified REIT Trust 2000-1 Ctfs Upgraded By Fitch.

Business Editors

NEW YORK--(BUSINESS WIRE)--Jan. 7, 2002

Diversified REIT Trust 2000-1 certificates have been upgraded by Fitch as follows: $18.1 million class B to `AA+' from `AA', $27 million class C to `A+' from `A', and $21.2 million class D to `BBB+` from `BBB'. The $50 million class A-1 certificates, $145.8 million class A-2 certificates, and interest-only class X certificates are affirmed at 'AAA' by Fitch. In addition, the following classes have also been affirmed: $11.3 million class E certificates at `BBB-`, $4.3 million class F certificates at `BB', $5 million class G certificates at `BB-` and $4.3 million class H certificates at `B'. All classes were privately placed pursuant to Rule 144A of the Securities Act of 1933.

The certificates represent beneficial ownership interests in the trust, the primary assets of which are unsecured senior debt obligations of real estate investment trusts (REITs) or operating partnerships in which REITs are the general partners. The 21 REITs comprising the DIRT 2000-1 pool predominantly invest in properties in one or more of the following six sectors: retail (37%), office (23%), health care (11%), multifamily (10%), self-storage (7%), diversified (7%), hotel (4%) and industrial (1%).

The Fitch ratings are based on the credit enhancement provided to each class by the subordination of the classes junior to it, reflecting payment priority and loss allocation sequence. The subordination provided to each rated class is as follows: 31.8% to classes A-1 and A-2; 25.5% to class B; 16.1% to class C; 8.7% to class D; 4.7% to class E; 3.2% to class F; and 1.5% to class G.

The rating associated with each credit enhancement level reflects Fitch's assessment of the transaction's strengths and concerns. Fitch's primary concern is the pool's concentration within a single industry (commercial real estate), high dividend distribution requirements for REITs, and the REIT sector's greater reliance on debt and preferred securities as sources of capital over the past several years. In addition, unsecured REIT debt lacks the control over specific assets enjoyed by secured commercial mortgage backed securities (CMBS), and may be subject to a lengthier and less predictable recovery process during bankruptcy. These concerns are mitigated by the strong asset and geographic diversity of the DIRT 2000-1 pool's underlying real estate assets, which aggregate approximately 5,400 individual properties with a historical book value of approximately $57 billion. Refinancing risk for REITs is also mitigated by fee-ownership of unencumbered assets, which can serve as a source of collateral in a refinancing scenario. As of Sept. 30, 2001, the DIRT 2000-1 pool's median historical cost of unencumbered real estate to total unsecured debt was 2.2 times (x) as calculated by Fitch, providing satisfactory debt refinancing capacity.

The overall performance of the DIRT 2000-1 trust assets remains good. Since the closing of the transaction in April 2000, debt protection measures for the DIRT 2000-1 pool have remained strong. Median interest coverage from earnings before interest, taxes, depreciation and amortization (EBITDA) was 3.1x for the third quarter of 2001. Also, since deal closing, 14.4% of the pool, representing four REIT credits, have been upgraded, while only 3.5% of the pool, representing one REIT credit has been downgraded. This has resulted in increased subordination levels on investment grade classes, thus warranting upgrades. Non-investment grade collateral continues to include the senior debt obligations of Bradley Real Estate, Inc. (3.5% of pool value) and Rouse Company (6.8% of pool value). The Bradley rating could be positively impacted by a proposed IPO of parent Heritage Property Investment Trust Inc, the company into which Bradley was privatized in 1999.

Fitch will continue to monitor this transaction, as surveillance is ongoing.