Fitch Upgrades Fairfax Funding Trust, Series 1998-1 -Fair Oaks Mall-.

Business Editors

NEW YORK--(BUSINESS WIRE)--Dec. 3, 2003

Fairfax Funding's $19.0 million class B commercial mortgage pass-through certificates are upgraded to 'AAA' from 'AA+'. In addition, the $86.0 million class A certificates are affirmed at 'AAA'. Fitch does not rate the $23.0 million class C and $12.0 million class D certificates.

The upgrade is due to the improving performance of the collateral, strong market position, and experienced ownership and management of the property. The Taubman Group L.P (TGLP) currently leases and manages Fair Oaks Mall. TGLP is a subsidiary of Taubman Centers, a publicly traded REIT that acquires, develops, and manages regional and super regional shopping centers in nine states.

The certificates evidence interests in a $140.0 million interest only first mortgage lien on the Fair Oaks Mall, located in Fairfax, VA. The property is a two-level, enclosed, 1.5 million square foot regional mall approximately 15 minutes from Washington, DC. Fair Oaks Mall was constructed in 1980, and expanded in 1987 and 2000. The mall is anchored by Hecht's, JC Penney, Sears, Lord & Taylor and Macy's. The collateral for the loan consists of the 582,000 square feet (sf) of in-line space.

Using trailing twelve month (TTM) 6/30/03 borrower financial statements, adjusted for capital items, a refinancing constant of 9.25% and the entire debt amount of the loan, the DSCR is 1.78 times (x) compared to 1.64x as of year-end 2001 and 1.39x at underwriting. The increased DSCR reflects a 28% improvement in cash flow from underwriting. The corresponding DSCR for the rated classes are as follows: 2.89x for class A, compared to 2.27x at issuance, and 2.37x for class B, compared to 1.86x at issuance. The LTV, calculated by applying a capitalization rate of 8.25% to the cash flow, has improved to 50.2% from 54.3% at year-end 2001 and 64.1% at issuance.

Fitch is somewhat concerned with the decline in occupancy since issuance, and upcoming lease rollover. In-line occupancy has remained relatively stable at 83% as of June 30, 2003, compared to 85% as of year-end 2002, but it has decreased from 88% at deal issuance. The PMM score rebounded to 1 from its decline to 2 at last review. The Fairfax, Virginia market continues to be one of the strongest in the country, as measured by per capita income and Fitch believes it will continue to support a solid retail market.

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