DBRS Changes Trend to Negative MLMLI S1999-Canada 2, Cl F

Dominion Bond Rating Service (“DBRS”) has today removed Class F of Merrill Lynch Mortgage Loans Inc., Commercial Mortgage Pass-Through Certificates, Series 1999-Canada 2 (“CAN 2”), currently rated BB (low), from "Under Review with Negative Implications" and has changed the trend to Negative. The following classes were confirmed with Stable trends: Classes A-1, A-2, X-1, X-2, and B at AAA; Class C at AA; Class D at “A”; and Class E at BB (high).

The decision to remove Class F from “Under Review with Negative Implications”, where it was placed in August 2005, resulted from additional information obtained regarding the sponsorship and recourse of the fourth-largest loan in the pool, Portage Place (5.8% of the current pool balance). The property was transferred without lender consent in April 2005. After reviewing the loan assumption request from the servicer, the guarantee was deemed to be better. The original borrower, Canadian Aspen Properties Ltd. and the new borrower, Spruceland Mall Limited Partnership, will now each be jointly and severally responsible for the loan guarantee up to 50% of the outstanding loan balance.

DBRS changed the trend of Class F to Negative because the performance of Portage Place remains challenged. Although the new borrower specializes in turn-around strategies and creating value at depressed properties, the financial performance is not expected to dramatically improve in the near term and the property faces additional challenges with significant lease expirations in the next two years.

Since 2002, the performance of the loan has declined and the borrower’s 2004 audited financials, received by DBRS in July 2005, indicate a debt service coverage ratio (DSCR) using net operating income to be below 1.0 times (x). While the loan remains current, a substantial decline in value since issuance can be implied as a result of the depressed operating income. A rent roll dated November 2005 suggests that occupancy for the collateral property remains high, at around 93.5%. However, despite the high occupancy, revenue remains flat at the property. Significant rental increases or expense savings will be needed to bring the DSCR above 1.0x. The property, an enclosed shopping centre, is located in downtown Winnipeg and is connected to the newly built MTS Centre via an enclosed skywalk. There are positive developments in downtown Winnipeg that may increase traffic at the property, including construction of the Manitoba Hydro building, which will be attached to the subject via sky-walk and is expected to be complete in 2007.

Financial performance of the overall pool is considered stable with no change in weighted-average DSCR since issuance. Two loans are specially serviced. One loan, Lincoln Park (0.7% of the current pool balance), is 30 days delinquent, and another loan, Tecumseth Pines (3.4% of the current pool balance), was transferred to the special servicer because of a technical default. DBRS does not expect there to be principal and interest losses on either of these loans.

The loan is a pari passu participation interest that has been split into two pieces, 55.9% and 44.1%. The 44.1% participation is in the CAN 2 trust and the 55.9% is in the Merrill Lynch Mortgage Loans Inc., Series 1998-Canada 1 (“CAN 1”) trust. GMAC Commercial Mortgage Corporation is the Master Servicer for both CAN 2 and CAN 1.

The performance update of the remaining loans in the CAN 2 transaction, including Portage Place, has been released. DBRS’s performance update provides the latest analytical data on the transaction, within the confines of the latest financial information, including performance information on each loan. DBRS will update this report accordingly as more information becomes available.