FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

Risks relating to Planning – Right of First Refusal
The Certificates of Title confirm that most of the Secured Properties are situated in a pre-emption zone
where the local authority holds a right of first refusal (droit de préemption urbain) upon a sale of the
Secured Property. This right of first refusal only applies to direct asset sales.
The right of first refusal may be exercised by the local authority within a two-month period following the
mandatory filing of the offer for sale of the Secured Property and for a different price than the offered
price. The local authority must inform the seller if it chooses to exercise its right of first refusal, in which
case the Seller may choose not to proceed with the sale or may request a judicial determination of the
acquisition price.
Risks relating to the existing Finance Leases
Eighteen Finance Leases have been entered into between 4 of the Borrowers (Paris Provinces Properties
SCI, Proudreed France SARL, IDB Immobilier SAS and Beaulieu Properties SCI), as finance lessees and
third-party finance lessors with respect to properties that are not included in the Property Portfolio. In
accordance with standard market practice, none of the Finance Leases contain provisions limiting the
recourse of the finance lessors against the finance lessees or their respective assets. Therefore, as an
unsecured creditor, each finance lessor benefits from a general right of recourse (droit de gage général)
against all the assets of the relevant finance lessee (in addition to the title which each finance lessor retains
over its property until the finance lessee exercises its purchase option). In addition, with respect to two
Borrowers (Beaulieu Properties SCI and Paris Provinces Properties SCI), the general right of recourse of
the finance lessor is not limited to the assets of the lessees and could extend to Paris Properties SARL by
reason of the unlimited liability nature of the lessees’ corporate form. Under French law, an SCI is an
unlimited liability company (although such liability is not joint and several) such that a creditor may, in
addition to the assets of the company, have recourse to the assets of the shareholders of the company.
All Finance Leases provide the finance lessor with an automatic termination right following any breach
by the finance lessee of its obligations under the Finance Lease (including, among other things, non
payment of rent or failing to deliver a compliance certificate). Following notice to the finance lessee of a
breach, the finance lessor may: (i) cancel the Finance Lease; and (ii) require repayment of all or part of
the outstanding non-amortised amount of the capital invested by the finance lessor at the date of
termination, and/or the payment of a penalty by the finance lessee to the finance lessor.
To reduce the risk of a breach under the Finance Leases and to prevent the finance lessors from pursuing
the rights described above, all rents due to the finance lessors will rank in priority to the payment of
interest and principal under the Commercial Mortgage Loans in the relevant Obligor Priority of
Payments, and each relevant Borrower will create a cash reserve which will be credited to its Finance
Lease Reserve Account (see the section entitled ‘‘Borrowers Finance Lease Reserve Account’’). Currently,
the annual rental income on the properties subject to the Finance Leases in respect of each Borrower
Group exceeds the annual amounts payable under the relevant Finance Leases. The relevant Borrowers
will represent and warrant on the Closing Date that there is no breach under the Finance Leases.
The Finance Leases provide the finance lessees with the option to purchase the relevant property. Each
Obligor that is a lessee under a Finance Lease will convenant, under the relevant Commercial Mortgage
Loan Agreement, not to exercise a purchase option under a Finance Lease unless (i) it certifies to the
Management Company that it is solvent and has immediately available funds to pay the purchase price
and all related costs in full and (ii) the price is financed by means of a subordinated, intra-group loan to
the relevant Obligor or out of funds standing to the credit of the relevant Borrower Junior Expenses
Account.
Prior Operating Histories
Each of the Borrowers was formed for the purposes of acquiring (or refinancing the acquisition of) and
holding its properties (including the related Secured Property). Each Borrower will represent that it has
no material or contingent liabilities except for those arising under the related Commercial Mortgage
Loans and as otherwise permitted by the related Commercial Mortgage Loan Agreement. Other than
IDB Immobilier SAS (formed in 1974), all of the Borrowers were formed during or after 1990.
Accordingly, although each Borrower will represent, among other things, that to its knowledge, as at the
Closing Date, it has no actual or contingent liability relating to any of its past activities other than the
purchase, financing, ownership or operation of the Secured Properties currently owned by it which, alone
or together with any other liabilities, may have a material adverse effect on the ability of the relevant
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