FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

Although any successor manager of a Secured Property appointed by a Borrower is required to be
experienced in managing retail, industrial and office premises, there can be no assurance that there will
not be a delay in the appointment of a successor, or a variation in the terms of any appointment of a
successor or that the appointment of any successor manager of a Secured Property would not have an
adverse effect on the relevant Borrower’s obligations to meet its obligations under the relevant
Commercial Mortgage Loan Agreement and, therefore, ultimately, the Issuer’s ability to make payment
under the Notes.
The net cash flow realised from the Secured Properties may be affected by management decisions. The
Property Manager will be responsible for property management pursuant to the terms of the applicable
Property Management Agreement. Although the Property Manager is experienced in managing
commercial property, there can be no assurance that decisions taken by it in the future will not adversely
affect the value of or cashflow from the Secured Properties.
The Property Manager may also operate, manage, acquire or sell properties, which are in the same
markets as the Secured Properties. In such cases, the interests of the Property Manager or the interests
of other parties for whom it performs servicing functions (which could include affiliates of the Borrowers)
may differ from, and compete with, the interests of the Borrowers, and decisions made with respect to
other real estate assets managed by it or in which it may have an interest may adversely affect the value
of the Secured Properties. However, the Property Manager Duty of Care Agreement provides that, if in
the course of providing the services under the Property Management Agreements and the Property
Manager Duty of Care Agreement, a conflict arises between the interests of the Property Manager on the
one hand and the interests of the Noteholders on the other, the interests of the Noteholders shall prevail.
Delegation in respect of leasing etc.
Except to the limited extent described herein, none of the Management Company, the Custodian, the
FCC Servicers, any Lender or any Noteholder or any other creditor of any Borrower or the Issuer has any
right to participate in the management or affairs of any Borrower. In particular, such parties cannot
supervise the functions relating to the management or operation of the Secured Properties and the leasing
and re-leasing of the space within the Secured Properties or otherwise. The Issuer will rely upon, inter alia,
the Property Managers and the other service providers for all asset servicing functions. Failure by any
such party to perform its obligations could have an adverse effect on a Borrower’s ability to meet its
obligations under the relevant Commercial Mortgage Loan Agreement and, ultimately, the Issuer’s ability
to make payments on the Notes. There can be no assurance that, were any such party to resign or its
appointment be terminated, a suitable replacement service provider could be found, or found in a timely
manner, and engaged on the same terms applicable to the relevant service provider as at the Closing Date
or on terms acceptable to the Management Company.
Dependence on Occupational Tenants – Re-letting risks
A significant proportion of the Occupational Leases which are in place at the Closing Date and many new
Occupational Leases granted (or to be granted) in the near future will expire or be determined in
accordance with their respective contractual terms. There can be no assurance that Occupational Tenants
will renew their respective Occupational Leases or, if they do not, that new Occupational Tenants of
equivalent standing will be found to take up replacement Occupational Leases. This is particularly the
case where a Secured Property requires refurbishment or redevelopment following the expiry of the
Occupational Lease. Furthermore, even if such renewals are effected or replacement Occupational Leases
are granted, there can be no assurance (in spite of the covenants given by each Borrower under the
relevant Commercial Mortgage Loan Agreement in this regard) that such renewals or replacement
Occupational Leases will be on terms (including rental levels and rent review terms) as favourable to the
relevant Borrower as those which exist now or before such termination (particularly if there is a change
in law relating to the terms of the Occupational Leases or some other change that is outside of any
Borrower’s control), nor that the covenant strength of Occupational Tenants who renew their Occupational
Leases or new Occupational Tenants who replace them will be the same as, or equivalent to, those now
existing or existing before such termination.
The ability of the Borrowers to attract new tenants paying rent levels sufficient to allow them to meet their
obligations under the Transaction Documents will depend on demand for space at each relevant Secured
Property and on the regional economy in the relevant Secured Property’s catchment area, which can be
influenced by a number of factors. Rental levels and the affordability of rents, the size and quality of the
building, the mix of tenants, the amenities and facilities offered, the convenience, location and local
environment of the relevant Secured Property, the amount of competing space available, the transport
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