FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
FCC Proudreed Properties 2005 HSBC SG CORPORATE ...
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within the Property Portfolio relating to a particular Borrower will be available for repayment of its<br />
Commercial Mortgage Loan. Amounts received in respect of the Secured <strong>Properties</strong> comprised within the<br />
relevant Property Portfolio by way of proceeds following a sale could be insufficient to pay amounts due<br />
under the related Commercial Mortgage Loan, and therefore, ultimately, the Issuer’s ability to make<br />
payments under the Notes may be adversely affected.<br />
The liquidation value of any Secured Property may be adversely affected by risks generally incidental to<br />
interests in real property, including changes in political and economic conditions or in specific market<br />
sectors, declines in property rental or capital values, changes in rental terms (including tenants’<br />
responsibility for service charges), variations in supply of and demand for retail, industrial or (as<br />
appropriate) office space, competition, the ability of the owner to provide maintenance and control costs,<br />
prevailing yields and interest rates in France, declines in occupancy rates, changes in governmental rules,<br />
regulations and fiscal policies, terrorism and other factors which are beyond the control of the Borrowers<br />
and any other party to the transaction.<br />
Reliance on Valuation Reports<br />
There can be no assurance that the valuations set out in the Valuation Report for each of the Secured<br />
<strong>Properties</strong> will continue at a level equal to or in excess of such valuations. To the extent that the value of<br />
each of the Secured <strong>Properties</strong> fluctuates, there is no assurance that the aggregate of the value of the<br />
Secured <strong>Properties</strong> will remain at least equal to or greater than the unpaid principal and accrued interest<br />
and any other amounts due under the related Commercial Mortgage Loan Agreement. If any Secured<br />
Property is sold following a Loan Event of Default, there is no assurance that the net proceeds of such<br />
sale will be sufficient to pay in full all or any amounts due under the relevant Commercial Mortgage Loan<br />
Agreement. In particular, it should be noted that the Secured <strong>Properties</strong>, being predominantly light<br />
industrial properties, are specialised property assets for which, in such circumstances, no ready market<br />
may exist. Furthermore, the value of the Secured <strong>Properties</strong> and, consequently, the Borrowers’ ability to<br />
pay amounts due under the Commercial Mortgage Loan Agreements and (ultimately) the Issuer’s ability<br />
to make payments under the Notes, are dependent on economic and real estate conditions in France and<br />
in particular the strength of the industrial sector.<br />
Environmental risks<br />
The environmental liability for clean-up costs in respect of any Secured Property under current French<br />
law is placed primarily on the operator of the activities carried out on such Secured Property. The<br />
operator is defined as the person who holds an operating permit or declaration receipt and controls the<br />
activity on a daily basis. However, in the case of warehouses, the authorities generally deliver operating<br />
permits to the property owner (ie. the owner of the Secured <strong>Properties</strong>). When no solvent or known<br />
operator can be found, the owner of the Secured Property may be found liable for the decontamination<br />
costs.<br />
A mortgagee who benefits from a mortgage over a contaminated Secured Property is not liable for any<br />
costs attached to the clean-up of such Secured Property prior to the enforcement of a mortgage. Under<br />
French law a mortgagee does not take possession of the Secured Property after enforcement of a<br />
mortgage except in certain limited circumstances (see ‘‘Enforcement of Obligor Security; Insolvency<br />
Considerations − Secured <strong>Properties</strong>’’ below); the mortgaged property is sold at court-supervised public<br />
auction and the mortgagee is repaid out of the proceeds of sale. Consequently, a mortgagee would not<br />
typically become either an owner or an operator of a property and therefore should not be liable for<br />
clean-up costs after enforcement of a mortgage. Case law has not yet imposed any liability on a mortgagee<br />
for any decontamination cost. However, it is possible that the law could change so as to impose liability<br />
on a mortgagee such as the Issuer. The holders of the Notes may ultimately suffer a loss if such a liability<br />
arises.<br />
A Secured Property might be subject to a soil and/or groundwater contamination risk assessment survey,<br />
if public authorities decide that the site presents hazards to soil and/or groundwater. The French<br />
contaminated land regime provides for the establishment and constant up-dating by public authorities of<br />
a list of sites to be subject to risk assessment surveys and imposes on the operator of real estate property<br />
on this list, or of real estate property otherwise identified as hazardous, an obligation to conduct, at its own<br />
cost, a soil and/or groundwater risk assessment survey. Depending upon the findings of such survey,<br />
further surveys, monitoring, or decontamination works may be imposed on the operator at its own cost.<br />
Such environmental surveys, monitoring, or decontamination costs, if imposed on a Borrower, could<br />
adversely affect its ability to service its debts. Similarly, if such costs are imposed on an Occupational<br />
Tenant they might affect its abilities to pay rent to the relevant Borrower, and so adversely affect that<br />
Borrower’s ability to service its debt. This could also affect the value of the Secured <strong>Properties</strong>.<br />
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