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Occupational Leases reviewed, there is unlimited rent suspension and no right for the landlord to
terminate the Occupational Lease, which could lead to no rent or insurance payments being made to the
landlord, but the Occupational Lease subsisting.
If reinstatement of the relevant Secured Property does not take place, then the proceeds of any monies
paid out under the terms of the insurance policy effected in respect of the Secured Property will be paid
to the relevant Borrower except in certain cases where (a) the Secured Property is subject to an
Occupational Lease where the Occupational Tenant is responsible for insuring such property where such
proceeds will be paid to the relevant Occupational Tenant and (b) the Occupational Tenant may be
entitled to receive certain sums in respect of items which it has installed at its own expense but which have
nevertheless become part of the premises as a matter of property law.
Each Borrower must deposit all monies received under any insurance policy (other than third party
liability or loss of rent insurance), above a de minimis threshold of £50,000 (as adjusted on an annual basis
by reference to changes in retail prices), into the relevant Insurance Proceeds Account. Any monies so
deposited may be withdrawn by the relevant Borrower (with the consent of the Borrower Security
Trustee) where either (a) such monies will be applied towards replacing, restoring or reinstating the
relevant Secured Property as required by the relevant Occupational Lease or (b) provided no Potential
Loan Event of Default or Loan Event of Default is continuing and both the Historical ICR and the
Projected ICR are equal to or above 1.3:1, such monies will be applied within the earlier of (i) 12 months
of being deposited into the Insurance Proceeds Account and (ii) 36 months (or such lesser period for
which the relevant Secured Property benefits from insurance for loss of rent) of the relevant damage or
destruction, towards replacing, restoring or reinstating the relevant Secured Property in circumstances
where that Secured Property is not subject to an Occupational Lease requiring such replacement,
restoration or reinstatement. Any monies not so applied will be applied towards prepayment of the
relevant Commercial Mortgage Loan in an amount equal to the Allocated Loan Amount of the relevant
Secured Property multiplied by the Release Price Percentage (or if less, the amount of monies so
deposited), with any balance, from such monies, remaining after such prepayment being paid to the
relevant Borrower. If, in respect of any particular Secured Property, any of the above time periods are (or
are likely to be) exceeded, the relevant Borrower will be entitled to request an extension to such time
periods from the Borrower Security Trustee. In granting any such extension, the Borrower Security
Trustee will be entitled to set additional conditions to be satisfied for such extension to apply.
There is a risk that if either the relevant Borrower or the relevant party with the obligation to reinstate
the relevant Secured Property is unable to reinstate, the proceeds of such insurance due to the relevant
Borrower, together with the proceeds from the sale of the land, might not be sufficient to permit the
relevant Borrower to meet its outstanding obligations under the relevant Commercial Mortgage Loan
Agreement and therefore, ultimately, the Issuer’s ability to make payments under the Notes may be
adversely affected.
If a claim is made under an insurance policy, but the relevant insurer fails to make payment in respect of
that claim, this could prejudice the ability of the relevant Borrower to meet its outstanding obligations
under the relevant Commercial Mortgage Loan Agreement and therefore, ultimately, the Issuer’s ability
to make payments under the Notes may be adversely affected.
The Commercial Mortgage Loan Agreements, Headleases and Occupational Leases also contain
provisions requiring the Borrowers to carry or procure the carrying of insurance with respect to the
Secured Properties in accordance with the specified terms. There are, however, certain types of losses
(such as losses resulting from war, terrorism (which, in relation to terrorism, within certain limits, is
currently covered by the existing insurances), nuclear radiation, radioactive contamination and heave or
settling of structures) which may be or become either uninsurable or not insurable at commercially viable
rates or which for other reasons are not covered, or not required to be covered, by the required insurance
policies. In addition, many of the Occupational Leases and the Headleases require the relevant Borrower
to make up any shortfall between insurance proceeds and the actual cost of reinstatement. Each
Borrower’s ability to meet its obligations under the relevant Commercial Mortgage Loan Agreement and
therefore, ultimately, the Issuer’s ability to make payments under the Notes may be adversely affected if
such an uninsured or uninsurable loss were to occur, to the extent that such loss is not the responsibility
of the landlord pursuant to the terms of a Headlease or the Occupational Tenants pursuant to the terms
of their Occupational Leases.
Disposals and Same-Day Substitutions of Mortgaged Properties
Under the terms of the Commercial Mortgage Loan Agreements, each Borrower will be entitled to
dispose of and/or substitute Secured Properties in certain circumstances. However, there can be no
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