Hatfield Philips International. DECO 10 Pan Europe 4 p.l.c. Investor Call. 27 th August 2015

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1 Hatfield Philips International DECO 10 Pan Europe 4 p.l.c. Investor Call 27 th August 2015 Hatfield Philips International 25 Canada Square 34th Floor London E14 5LB

2 Disclaimer This report has been compiled by Hatfield Philips International Limited ("Hatfield Philips") in its capacity as Special Servicer of the loans which are discussed in this report. Hatfield Philips makes no representation as to the reliability of the information provided to it by third parties in order to compile this report. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments. This presentation may contain forward looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Hatfield Philips s control. Neither the whole nor any part of this report may be reproduced in any published document, circular or statement, nor is it to be relied upon by any party, without the prior written permission of Hatfield Philips. Hatfield Philips disclaims any duty, responsibility or liability of any nature whatsoever to any party in respect of this report other than to its contractual partners.

3 Deco 10 Pan Europe 4 p.l.c. DEAL SUMMARY Asset Profile Current Balance ( ) # Property Loan Whole Loan A-Note B-Note(s) Properties Location Type Maturity Loan Status Transfer Date Workout Strategy DFK Portfolio 12,925,804 6,117,984 6,807,820 0 Germany Office Oct-2013 In Special Aug-2013 Borrower-led sale Toom DIY 7,114,500 7,114,500-1 Germany Retail/DIY Oct-2013 In Special Oct-2013 Borrower-led sale Edeka Retail 12,052,507 12,052,507-5 Germany Retail Jul-2013 In Special Sep-2012 Enforcement of voting rights and sale Lübeck Retail 13,737,426 13,737,426-1 Germany Mixed Use Oct-2013 In Special Oct-2013 Enforcement of voting rights and sale Total 45,830,237 39,022,417 6,807,820 7 Value Valuation Current Whole Loan Loan ( ) Date LTV Occupancy WALL DFK Portfolio all properties sold Toom DIY 5,460,000 Dec % 100.0% 6.0 Years Edeka Retail 10,480,000 Dec % 95.3% 5.3 Years Lübeck Retail 9,490,000 Jan % 67.3% 7.6 Years Total 25,430,000 3

4 DFK Portfolio Loan Status UPB at Origination EUR 43,065,000 Current UPB EUR 12,925,804 Initial Whole Loan LTV 80.5% Current Whole Loan LTV SpS Transfer Date 02/08/2013 Estimated Resolution Date Q Asset Stats Lettable area all properties sold No. of assets 0 Asset type Office Valuation/Date Location NRI ERV Vacancy WALL Strategy Sale of residual loan to borrower related entity. Workout History The loan matured on 20 October 2013 and the borrower was not able to repay. Borrower-related AM sold the Kelkheim asset for EUR 9.074m. Closing of the SPA took place on 13 February Funds were distributed at April 2014 IPD. A borrower-led sale term sheet was signed in June 2014 and a standstill was put in place which was extended until July 2015 to allow for the sales to be signed. In August 2014 the sales broker Nexus Capital Advisors was appointed to sell the assets in Düsseldorf and Frankfurt. The sale of the Düsseldorf property was signed on 19 December 2014 for EUR 5.8m. Closing of the SPA took place on 31 March Funds were distributed at April 2015 IPD. The sale of the Frankfurt property was signed on 5 May It was agreed between the parties not to disclose the purchase price. Closing of the SPA took place on 30 June Funds were distributed at July 2015 IPD. Some funds are held back in order to cover remaining costs, including costs for sale of remaining loan. All expected funds from the sales have been distributed. Performance / Credit Events The loan transferred from Primary to Special Servicing in August 2013 due to an LTV breach. Following a new valuation, a Control Valuation Event took place in October According to the latest valuation as of June 2013 the values were: Kelkheim: EUR 8.98m Frankfurt: EUR 16.87m Düsseldorf: EUR 4.13m The loan matured on 20 October Interest rate changed from fixed to floating after maturity, default interest of 2% is being charged. 4

5 Toom DIY Loan Status UPB at Origination EUR 7,650,000 Current UPB EUR 7,114,500 Initial Whole Loan LTV 83.7% Current Whole Loan LTV 130.3% SpS Transfer Date 22/10/2013 Estimated Resolution Date Q Asset Stats Lettable area 8,500 sqm No. of assets 1 Asset type Retail, DIY Valuation/Date EUR 5,460,000 / 31/12/2013 Location Neukirchen-Vluyn, Germany NRI EUR 640,008 ERV EUR 637,500 Vacancy 0.0% WALL 6.0 years Workout History The borrower failed to repay the loan at maturity in October A workout agreement was signed end of July 2014 and following a broker pitch, G.U.N. IC was appointed to market the asset. After comprehensive marketing, exclusivity was granted to the highest bidder at the time. Upon expiry of the exclusivity, this bidder stepped back from its offer without further explanation and the second highest bidder, which had increased its offer to EUR 5.4m in the meantime, was immediately granted exclusivity until end of March A sale and purchase agreement was signed on 7 July 2015 for a purchase price of EUR 5.365m. This is ca. 2% below the latest valuation due to reduced WALL. The closing is in progress and is expected in time for the October 2015 IPD. To enable execution of the strategy, a standstill (extended several times) was granted until 31 January In order to facilitate the closing of the sale and purchase agreement the standstill was extended until the end of October Performance / Credit Events Maturity default at October 2013 IPD. Transfer to Special Servicing on 22 October Interest rate changed from fixed to floating after maturity, default interest of 2% is accruing. Strategy Work towards closing of the sale and purchase agreement. Sale of residual loan to borrower related entity after closing. 5

6 Edeka Retail Loan Status UPB at Origination EUR 13,714,094 Current UPB EUR 12,052,507 Initial Whole Loan LTV 83.5% Current Whole Loan LTV 115.0% SpS Transfer Date 04/09/2012 Estimated Resolution Date Q Asset Stats Lettable area 9,853 sqm No. of assets 5 Asset type Retail Valuation/Date EUR 10,480,000/ 01/12/2012 Location Various, Germany NRI EUR 1,080,600 ERV EUR 995,296 Vacancy 4.7% WALL Strategy 5.3 years Finalise sales negotiations. Sign an SPA for the remaining properties within Q Workout History The loan was transferred to Special Servicing on 4 September 2012 as a result of non-payment default on the July 2012 IPD. Following unsuccessful negotiations with the sponsor regarding a consensual share transfer, the Special Servicer enforced security via voting right enforcement in Luxembourg. Following enforcement, the borrower s management was replaced with new directors and in July 2013 the parties entered into a 12 months standstill agreement (until July 2014) which was extended until 20 October 2015 to allow for the orderly sale of the remaining properties. VALAD was instructed as asset manager with the task to manage and sell the properties. On 8 December 2014 the SPA for the sale of the property in Borken was signed for EUR 500k, closing occurred end of January 2015, funds were distributed during April 2015 IPD. Performance / Credit Events The loan matured in July 2013 and switched from fixed to floating interest. Default interest of 2% is accruing on overdue amounts since non-payment default in July The properties continue to generate sufficient income to pay quarterly interest (regular and default). The 5 remaining properties are let to Edeka. There were no new leases or lease renewals. VALAD has marketed the remaining 5 properties through three brokers and received more than 30 bids for single assets, part of the portfolio, or the whole portfolio. Due to unsatisfactory results in the first bidding round, VALAD started a second round of marketing and received several promising portfolio bids. Exclusivity was granted to the highest bidder. 6

7 Edeka Retail Property Information Property No. Property Valuation Date Valuation Sold Amount Repayment IPD 1 Borken-Burlo, Borkener Str Dec , ,000 April 2015 IPD 2 Gladbeck, Bottroper Straße Dec-12 6,190, Herne, Castroper Straße Dec-12 1,850, Münster, Von Schonebeck Ring Dec , Neukirchen-Vluyn, Ernst-Moritz-Arndt-Straße Dec , Oberhausen, Grasshofstraße 139A 01-Dec-12 1,090, Total 10,815,000 7

8 Lübeck Retail Loan Status UPB at Origination EUR 15,300,000 Current UPB EUR 13,737,426 Initial Whole Loan LTV 80.3% Current Whole Loan LTV 144.8% SpS Transfer Date 22/10/2013 Estimated Resolution Date Q Asset Stats Lettable area 12,423 sqm No. of assets 1 Asset type Mixed Use Valuation/Date EUR 9,490,000 / 01/01/2014 Location Lübeck, Germany NRI EUR 935,412 ERV EUR 1,100,654 Vacancy 32.7% WALL 7.6 years Workout History The loan was transferred to Special Servicing on 22 October 2013 due to payment default at maturity. The Special Servicer exercised the voting rights and replacing the borrower s management with new directors. A standstill was granted until 31 August The asset manager/sales manager mandated in April 2014 to lease up vacant space and sell the property has so far concluded the following leases: Leases with tenants Body Attack (until Sept 2020) and MPC Music GmbH (until end of 2030) have been prolonged. New lease with a wholesale business in the sanitary sector for the vacant retail space was signed (lease term: 12 years, rent: EUR 94k p.a., CapEx & TIs & Incentives: EUR 260k). New lease with a bowling tenant was signed (lease term: 15 years, rent: EUR 216k p.a., CapEx & TIs & Incentives: EUR 773k). Performance / Credit Events The loan switched from fixed to floating interest after maturity. Default interest of 2% is accruing on overdue amounts. LTV: Given the substantial drop in valuation from EUR 19m to EUR 9.49m, the Lübeck loan is well above the 100% threshold and in breach of the 85% LTV covenant. An amicable out-of-court settlement agreement was met with former tenant Gilde Bowling (lease was terminated on 11 Sep 2013 due to significant rental payment arrears) in order to eliminate uncertainty of results by enforcing the claim and in order to get hold of the bowling alleys that could only then be passed on to the new tenant. Tenant Edeka prematurely vacated the building, lease expiry in Oct Lease-up activities will be undertaken. Strategy Start of the marketing and sales process will occur in September 2015, signing of a sale and purchase agreement is expected for end of 2015/beginning of The Special Servicer intends to enter into a further standstill agreement in order to facilitate the sales process. 8