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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. CAPEX PLAN
* Amounts are fiction 17 17

18. Thank you for your attention.
END
Thank you for your attention.
Contact : Yilmaz KARAUC 18 18