LCP Proudreed PLC - Irish Stock Exchange

assurance that a Borrower will exercise its rights under these provisions in such a way that the pattern or
number of disposals and/or substitutions will increase the quality and value of its Property Portfolio or its
income generating capacity. For example, a Secured Property’s value may decline significantly if it
requires refurbishment, as may the ability of the owner to attract tenants at market rental rates. The risks
associated with the effect of the disposal and/or same-day substitution of Secured Properties on the value
and rental income generating capacity of each Borrower’s Property Portfolio is mitigated by the
conditions related to disposal and same-day substitutions under the Commercial Mortgage Loan
Agreements (as to which, see ‘‘Summary of Principal Documents – Commercial Mortgage Loan
Agreements’’ below).
Property Management
While L.C.P. Management Limited as Property Manager is experienced in managing retail, industrial and
office property and has managed the Secured Properties since they were first acquired by the Transferors
or Proudreed Limited, as the case may be, and despite payment of the fees (as detailed below) being at
competitive market rates, there can be no assurance that the Property Manager will continue to act in the
future as such. The Property Manager receives a fixed management fee for the performance of its services,
which may be subject to upward review. A management fee of up to four per cent. of the then-current
Gross Rental Income for the relevant Property Portfolio for the period in respect of which such fees are
payable is payable to the Property Manager senior to payments in respect of the relevant Commercial
Mortgage Loan under the Obligor Pre-Enforcement Priority of Payments. 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 Property
Management Agreements. Although the Property Manager is experienced in managing retail, industrial
and office 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.
During the course of its business activities, the Property Manager may 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
Deeds provide that, if in the course of providing the services under the Property Management
Agreements and the Property Manager Duty of Care Deeds, 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 Borrower Security Trustee, the Issuer Security
Trustee or any Noteholder or any other Obligor Secured Creditor or Issuer Secured Creditor 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 and the other Obligor
Secured Creditors will each rely upon, inter alia, the Property Manager 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 Borrower Security Trustee
and/or the Issuer Security Trustee (as applicable).
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