Technical Due Diligence Process Acquisition & Renovation Projects GESIIC, Panthéon-Sorbonne Paris, 2013 Yilmaz KARAUC Global Project Management

Relevance for the Buyer Relevance for the Vendor CONTENTS Due Diligence Aims Laws & Regulations Relevance for the Buyer Relevance for the Vendor Project Validation Sequences / Phases of the Technical Due Diligence Typical Scope of the Technical Due Diligence Services 2 2

Technical Due Diligence : Due Diligence Aims Investigations by professional experts specialized in audits of construction and real-estate on the following fields: technical, accounting, financing, legal or tax matters, whose conclusions serve to confirm material facts in regards to a sale and will be of use as base to the investor decision-making. Technical Due Diligence : Assess the reality of the technical or environmental liabilities attached to the investment Assess more finely the real value of the real-estate asset included in the deal. Assessments are made through the evaluation of : Risks on the solidity, pollutions, pathologies, conformities, safety and security Possibilities for renovation techniques (technical feasibility & constructability) Needs of maintenance and upgrade of the installations and equipment. 3

Article 1641 of French Civil Code Law & Regulations Article 1641 of French Civil Code « The vendor is required to the warranty defects hidden in the thing sold which render it unfit for the use for which it was intended or which so diminish the use that the buyer would have not acquired it, or in would have given that a lower price if he had known » The buyer may seek resolution of the sale or the return of part of the price if he reported evidence of the existence of a hidden defect vitiating the property (presence of lead, asbestos, biological agents,...). Articles 1382 and 1147 of French Civil Code concerning technical & environmental diagnostics on the property: « Obligation to realize due diagnostics on the real-estate property prior its disposal or lease. » 4

Relevance for the Buyer For the buyer, in addition to those that precedent, it will give the opportunity to seek the possibilities/opportunities for value creation in the study of programming of the future work (Property Improvement Plan), in particular by the review and optimization of followings: Program, Usage and functionalities, Features, Ratio of Surfaces and occupation density, Security and Safety In order to: Reduce exploitation costs, And increase operating revenues. Through this, the buyer will seek to improve the profitability of its investment, and thus its future development & valuation on resale. 5

Relevance for the Vendor For the Vendor, the interest is double: Meet the obligations arising out of articles 1641, 1382 and 1147 of the civil Code, Anticipate problems and strengths of its building for his recovery and valuation. 6

Company’s culture and style Deal’s characteristics Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence Note: The following is not the process to apply mecanically, but a process as an example. It is open to reconsideration and review. You are encouraged to make it rational to you and to suit to the specificities such as your: Company’s culture and style Deal’s characteristics Business partners with whom you are in deal. Treat them with the concern you yourself would like to receive. 7

Confidentiality & Info Memo Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence 1 2 3 4 5 6 Key Steps Assessment (DD&PIP) & Feasibility Study Concept Design Detailed Program & Scheme Design Final Program & Detailed Design Interiors Design Development Production Information & Tender Execution Design & Project Works Project Delivery & Opening Due Diligence Phase 1 TDD Phase 1 : Constitution of the assessment file Check and collect all information documents that should constitute the Data-Room. Confidentiality & Info Memo 8 8

Scope of Services for the Phase 1: Préparation of the audit Check the accesses to the Data-Room and to the building Access formalities beside vendor representatives and councils Preliminary check of the exhaustiveness of documents and information appearing on the list of the Data-Room Verification of the exhaustive list of the documents and the information available in the Data-Room Raise the list of questions and requests for complementary documents If available, analyze the vendor due diligence report and propose a list of additional audits Attend kick-off meetings and draft minutes of meetings Draft and provide status report of the Phase 1 9

Confidentiality & Info Memo Validation & Process Letter Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence ESQ Key Steps Assessment (DD&PIP) & Feasibility Study Concept Design Due Diligence Phase 1 Due Diligence Phase 2 TDD Phase 2 : Initial Cost Plan and Preliminary Program Analyze the technical aspects of the building and the associated risks, Define a preliminary program of renovation and CAPEX plan, including the preliminary cost estimation, (PIP: Property Improvement Plan) Supply elements for setting up the Business Plan. Confidentiality & Info Memo Validation & Process Letter 10 10

Scope of Services for the Phase 2 : Audit prior to the binding offer and promise to sell Analyze technical status of the building and assess associated risks Review all documents in Data-Room, On site visits to audit the status of building components, technical installations & equipment, Review all historical data regarding the site, its environment & geological situation Review all historical data regarding maintenance works during the last 5 years, Review of the insurance claims log related to the building Conduct and analyze sol surveys, and visual diagnostics (lead, asbestos, termite, parasites, legionella, contaminations, etc..), Check the compliance with the origin construction permit and with the current legislation. Analysis and possible updates of the preliminary Program of renovation together with the cost estimate Estimate the proposed renovation cost and long term capital expenditure Provide 10 year CAPEX cost plan, taking into account the renovation program Update the exhaustive list of documents et information available in Data-Room Assistance in the negotiations and in the drafting of the transaction documents Draft and provide full report of the Phase 2 11

TDD Phase 3 : Define Final Budget and Program Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence Investment Committee ESQ Key Steps Assessment (DD&PIP) & Feasibility Study Concept Design Detailed Program & Scheme Design Due Diligence Phase 1 Due Diligence Phase 2 Due Diligence Phase 3 TDD Phase 3 : Define Final Budget and Program Finalize the renovation program and the CAPEX plan, included associated budget, Organize eventual third party expertise in case of disagreement on the questioning of any building component, Establish the Price for the acquisition of the asset. Confidentiality & Info Memo Validation & Process Letter Binding Offer & Promise to Sell 12 12

Scope of Services for the Phase 3 : Complementary audit post promise to sell Complementary studies and updates regarding the technical state of the building and associated risks Review of complementary elements and answers provided by the Vendor Additional on-site visits, research, collect et communicate all elements provided after the phase 2 Conduct and analyze complementary visual diagnostics Conduct and analyze destructive diagnostics with the agreement of the Vendor on each area Analyze et consider all complementary elements that communicated, arisen or discovered after the signature of the promise to sell Organize eventual third party expertise in case of disagreement on the questioning of any building component, Possible update of the renovation program & CAPEX, and of the cost estimations & cost plan Update the exhaustive list of documents et information available in Data-Room Assistance in the negotiations et in the finalizing the transaction documents Draft and provide full report of the Phase 3 13

TDD Phase 4 : Identify unforeseen additional costs Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence Investment Committee ESQ ScD Key Steps Assessment (DD&PIP) & Feasibility Study Concept Design Detailed Program & Scheme Design Due Diligence Phase 1 Due Diligence Phase 2 Due Diligence Phase 3 Due Diligence Phase 4 TDD Phase 4 : Identify unforeseen additional costs Conduct destructive diagnostics prior renovation works to reduce risks on trade work contracts, Initiate a possible revision of the renovation budget & program in case of new element arisen or discovered after the signature of the asset sale contract. Confidentiality & Info Memo Validation & Process Letter Binding Offer & Promis to Sell Deed of Sale 14 14

Monitor that all conditions are met prior to release of the deposits. Scope of Services for the Phase 4 : Complementary audit post transaction (deed of sale) Assistance in the follow up of the annex agreements of the deed of sale (i.e. Vendor committed to carry out works or any other action) Organize complementary destructive diagnostics prior trade work contracts Research, collect and communicate any specific complementary elements provided after the signature of the deed of sale If necessary, adjustment of the renovation Program and the CAPEX plan, including the cost estimate, in case of new elements arisen or discovered after the signature of the deed of sale Monitor that all conditions are met prior to release of the deposits. Six months after the signature of the deed of sale, draft & provide the status report of the Phase 4. 15

Acquisition & Renovation Projects Project Validation Sequences / Phases of the Technical Due Diligence Investment Committee Steering Committee Steering Committee Steering Committees Mock-ups Handover Opening ESQ ScD Key Steps Assessment (DD&PIP) & Feasibility Study Concept Design Detailed Program & Scheme Design Final Program & Detailed Design - Interiors Design Development Product Information & Tender Execution Design & Project Works Project Delivery & Opening DeD PrI ExD AsB Due Diligence Phase 1 Due Diligence Phase 2 Due Diligence Phase 3 Due Diligence Phase 4 Confidentiality & Info Memo Validation & Process Letter Binding Offer & Promise to Sell Deed of Sale CLOSING 16 16

CAPEX PLAN * Amounts are fiction 17 17

Thank you for your attention. END Thank you for your attention. Contact : Yilmaz KARAUC ykarauc@hotmail.com 18 18