FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

In relation to industrial activities, French environmental legislation imposes restrictions on certain
activities carried out on specific industrial sites and more generally any activities which may affect, inter
alia, the surrounding area, the environment or public health. A list published by the Ministry of the
Environment (Nomenclature des installations classées) sets out the activities subject to this environmental
legislation and whether an activity is subject to prior authorisation by the Préfet (the head of the public
authority (Préfecture) that administers the relevant département (district) of France) or merely to a
declaration by the operator or the owner. For instance, covered warehouses as well as the storage of
flammable products are regulated under French environmental permits.
The operating conditions for warehouses were strengthened by a ministerial order of 5 August 2002 (as
published in the French Official Journal on 1 January 2003). As a result of this ministerial order, the
operator of a warehouse may now face additional compliance costs under French law.
Failure to obtain or comply with any environmental laws or permits may result in a temporary shutdown
of business operations at the premises. If the operator does not remedy the situation within the prescribed
period, the Préfet may, among other things, order the closure of the facility or the temporary or permanent
prohibition of the carrying out of the business. However, if the business has been in operation for a long
time, current practice is generally for the DRIRE (technical services of the Préfet) to assist the operator
in order to help it remedy the situation, rather than impose sanctions.
Environmental reports produced by Arcadis in June 2005 in relation to Secured Properties representing
75% of the Market Value of all warehouse, light industrial and mixed use Secured Properties (and 55%
of the Market Value of the Secured Properties as a whole) did not reveal any material environmental
issues. The environmental reports produced by Arcadis did not cover office properties.
The Borrowers will warrant in the Commercial Mortgage Loan Agreements on the Closing Date, in
respect of each of the Secured Properties, as to environmental matters as summarised in ‘‘Summary of
Principal Documents – The Commercial Mortgage Loan Agreements – Representations and Warranties’’
below. A breach of the environmental representation and warranty contained in a Commercial Mortgage
Loan Agreement will constitute a Loan Event of Default in respect of the relevant Borrower unless the
underlying circumstances are remedied within any relevant grace period and save where the breach is
immaterial.
Reports
Apart from the Certificates of Title, the Orrick Report, the Environmental Reports, the excerpts of the
financial reports of Mazars & Guerard reproduced herein and the Valuation Report reproduced herein,
no new reports have been prepared specifically for the purpose of this Offering Circular or the
transactions contemplated herein and none of the Issuer, the Joint Lead Managers, the Management
Company, the Custodian, the FCC Servicers and the Lenders, the Noteholder Representatives, the
Hedging Providers and the Liquidity Facility Provider has made any independent investigation of any of
the matters stated therein except as disclosed in this document.
Compulsory purchase risks
Any property in France may at any time be compulsorily acquired by, inter alia, a local or public authority
or a governmental department in connection with proposed redevelopment or infrastructure projects
which it believes is in the public interest. Compulsory acquisition occurs by way of expropriation which
is deemed to be in the public interest. No such compulsory acquisition proposals have been revealed by
the Certificates of Title prepared by the Notary. However, it is impossible to predict whether any such
proposals will arise in the future.
In the absence of exceptional circumstances (such as war), the expropriation proceedings that would apply
in the case of a property would be the standard expropriation proceedings provided for by the French
Code de l’expropriation.
Administrative authorities need to assert the existence of a public interest in order to justify the
expropriation of a contemplated property. The notion of ‘‘public interest’’ is objectively determined by the
administrative courts and may not be based purely on the economic interests of a specific local authority.
The law provides that public interest applies to various projects pertaining to public health, education,
transport and town planning.
The decision to deprive a private owner of property may only be taken by the judicial courts (as opposed
to the administrative courts mentioned in the paragraph above). Such judicial court will also determine
the amount of the compensation payable to the owner of the relevant property. There is no time limit for
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