LCP Proudreed PLC - Irish Stock Exchange

Reports
Apart from the Certificates of Title, the Overview Reports and the financial reports of Ernst & Young and
the Valuation Reports 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 or the Note Trustee has made any independent investigation of any of the matters stated
therein except as disclosed in this Offering Circular.
Compulsory purchase risks
Any property in the United Kingdom may at any time be compulsorily acquired by a public authority
possessing compulsory purchase powers (for instance, local authorities and beneficiaries of statutory
undertakings (including electricity, gas, water and railway providers) in respect of their statutory
functions) if it can demonstrate that the acquisition is required. Local authorities can acquire land
compulsorily for carrying out development, redevelopment or improvement and can do so if they think
that such development, redevelopment or improvement is likely to be of economic, social or environmental
benefit to their area.
As a general rule, if an order is made in respect of all or any part of a Secured Property, compensation
would be payable on a basis equivalent to the market value of all the Borrowers’ and Occupational
Tenants’ proprietary interests in the Secured Property at the time of the purchase, so far as those interests
are included in the order, taking account of diminution in value of any retained land and other adverse
impacts of the compulsory purchase. In England, additional compensation may be available to owners and
tenants that have held their interest in the land for at least a year.
There is often a delay between the compulsory purchase of a property and payment of the compensation,
although advance interim payments of compensation may be available where the acquiring authority
takes possession before compensation has been granted.
As at the Closing Date, only one Secured Property is known to be affected by a compulsory purchase
proposal: a strip of land that is part of the Secured Property at Rochdale is subject to a compulsory
purchase order to improve the Rochdale Canal. The land affected has not yet been transferred to
Rochdale Metropolitan Borough Council. Also, pursuant to the terms of the Commercial Mortgage Loan
Agreements, each Borrower will be obliged, where a compulsory purchase proposal has been made
affecting a Secured Property within its Property Portfolio and the relevant Secured Property is transferred
pursuant to such compulsory purchase order, to prepay in whole or in part the relevant Commercial
Mortgage Loan in accordance with the terms of the relevant Commercial Mortgage Loan Agreement.
(For further details as to such substitutions, please see further the section entitled ‘‘Summary of Principal
Transaction Documents – Commercial Mortgage Loan Agreements’’ below).
It is possible that a compulsory purchase order may be made in respect of one or more of the Secured
Properties in the future. In such event, there is no guarantee that the amount of compensation received
in connection with any compulsory purchase order or that the substitution of a Secured Property the
subject of a compulsory purchase order, would not have an adverse effect on the ability of the affected
Borrower to meet its obligations under the relevant Commercial Mortgage Loan Agreement and
therefore, ultimately, the Issuer’s ability to make payments under the Notes might be adversely affected.
Risks relating to the Headleases
The Borrowers will hold their interest in the whole of 14 of the Secured Properties, and in part of two of
the Secured Properties, pursuant to a Headlease.
Geared Rents under the Headleases
Six of the Headleases provide that the rent payable to the landlord is not a fixed amount. Instead, the rent
is based on a percentage of either the rental income received or the best achievable open market rents at
these Secured Properties.
As a result, the amount of rent payable to the landlord by the relevant Borrower may increase (although
only if rents receivable/rental value increase). In the case of rent payable on the rental value (as opposed
to rent receivable), this may increase even if the rents under the Occupational Leases do not also increase
in line with such increased rental value.
Forfeiture
The Headleases in respect of the Secured Properties at Euston Street, Leicester (the ‘‘Leicester
Property’’) and 22/27A The Green, Stubbington (the ‘‘Stubbington Property’’) contain a right for the
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