Contract analysis

I. Introduction and Purpose The purpose of this memorandum is to summarize key provisions and identify critical issues in the initial draft Agreement of Lease (the "Draft Lease") received from Pemberton Locke & Strauss LLP (Diane Ashford and Kevin Mulcahy), counsel for Greystone Metropolitan Realty LLC ("Landlord"), which was transmitted to our office on April 18, 2023. This memorandum is intended to provide a compre

II. Summary of Basic Lease Terms A. Parties. The Draft Lease identifies the following parties: • Landlord: Greystone Metropolitan Realty LLC, a Delaware limited liability company, with its principal office at 600 Lexington Avenue, 32nd Floor, New York, NY 10022. • Tenant: Aurelius Media Holdings Inc., a Delaware corporation, which is a wholly owned subsidiary of Aurelius Global Media Group PLC, a public limited compa

III. Assignment and Subletting Restrictions A. General Assignment and Subletting The Draft Lease provides that Tenant may not assign the Lease or sublet all or any portion of the Premises without Landlord's prior written consent. The consent standard set forth in the Draft Lease is "in Landlord's sole and absolute discretion." This is a critical issue. A "sole and absolute discretion" consent standard for assignment

1. The consent standard must be revised from "sole and absolute discretion" to "not to be unreasonably withheld, conditioned, or delayed."

2. The recapture right should be narrowed to apply only to (a) proposed assignments of the entire Lease to unrelated third parties, and (b) proposed sublettings of more than two (2) full floors for a term in excess of seventy-five percent (75%) of the remaining Lease Term. The recapture right should not apply to (i) assignments or sublettings to affiliates or permitted transferees, (ii) sublettings of less than two f

3. In the event Landlord exercises a recapture right, Landlord should be obligated to reimburse Tenant for the unamortized value of Tenant's leasehold improvements in the recaptured space (amortized on a straight-line basis over the initial Lease Term).

4. The Draft Lease should include provisions governing the sharing of subletting profits (i.e., any excess of subrent over the rent payable under the Lease, net of reasonable transaction costs including brokerage commissions, legal fees, and the cost of preparing the sublet space). A 50/50 profit-sharing arrangement between Landlord and Tenant is standard in the Manhattan market. B. Change of Control — Critical Defic

IV. Security Deposit A. Amount and Form The Draft Lease requires Tenant to deliver a security deposit in the amount of $5,180,000, which is equal to one (1) year of initial base rent at the Year 1 rate. The security deposit must be in the form of an irrevocable standby letter of credit issued by a "nationally recognized commercial bank." The Draft Lease does not further define "nationally recognized commercial bank,"

V. Parent Guaranty The Draft Lease acknowledges that a guaranty is required from the "parent entity" of Tenant but does not specify the terms, cap, form, or substance of the guaranty. The guaranty provision in the Draft Lease is a placeholder, stating only that "Tenant shall cause its parent entity to deliver a guaranty in form and substance reasonably satisfactory to Landlord." This is inadequate and must be substan

VI. Tenant Improvement Allowance (Work Letter) A. TI Allowance Amount The Draft Lease includes a Work Letter providing that Landlord will contribute a tenant improvement allowance ("TI Allowance") toward the cost of Tenant's initial build-out of the Premises. The TI Allowance amount set forth in the Draft Lease is $75.00 per RSF. At 185,000 RSF, this yields a total TI Allowance of $13,875,000. Issue Identified: Aurel

VII. Expansion Option A. Expansion Space The Draft Lease includes an expansion option granting Tenant the right to lease additional space on Floors 39 and 40 of the Building (the "Expansion Space"). Each floor comprises approximately 37,000 RSF, yielding a total Expansion Space of approximately 74,000 RSF. If exercised, the expansion would increase Tenant's total occupancy to approximately 259,000 RSF (approximately

VIII. Fair Market Rent Determination Procedure The Draft Lease includes a Fair Market Rent ("FMR") determination procedure that applies to both the expansion option (Section VII above) and the renewal options (Section X below). The procedure is structured as follows: (1) Landlord's Notice: Landlord delivers written notice to Tenant of Landlord's determination of the FMR for the applicable space. (2) Negotiation Perio

IX. Use Clause The Draft Lease restricts the permitted use of the Premises to "general and executive office use" only. Issue Identified: This use clause is too narrow for Aurelius's intended operations at 787 Seventh Avenue. As a global media, entertainment, and e-commerce company, Aurelius plans to utilize portions of the Premises for studio and production facilities, content creation spaces, screening rooms, and ot

X. Renewal Options The Draft Lease includes one (1) five-year renewal option, exercisable by Tenant upon not less than twelve (12) months' prior written notice before the expiration of the initial Lease Term. The renewal rent is to be at Fair Market Rent determined in accordance with the FMR procedure described in Section VIII above. Issue Identified: Aurelius requires two (2) consecutive five-year renewal options, n

XI. Right of First Offer (ROFO) A. ROFO Space The Draft Lease includes a right of first offer ("ROFO") granting Tenant the right to lease any full floor on Floors 30 through 33 of the Building (the "ROFO Space") that becomes available during the Lease Term. Each of these floors comprises approximately 37,000 RSF, for a total potential ROFO Space of approximately 148,000 RSF. If Tenant were to lease all of the ROFO Sp

XII. Subordination, Non-Disturbance and Attornment (SNDA) The Draft Lease provides that the Lease is subordinate to the existing first mortgage on the Building held by Atlas Continental Bank, N.A. (recorded on January 15, 2019, with an outstanding principal balance of approximately $620,000,000). The Draft Lease further requires Tenant to execute a Subordination, Non-Disturbance and Attornment Agreement ("SNDA") in t

XIII. Signage The Draft Lease provides Tenant with a lobby directory listing only, with no additional signage rights. Issue Identified: As part of the business terms negotiated with Landlord through Blackmoor Advisory Group LLC, Aurelius has secured expanded signage rights that are not reflected in the Draft Lease. Given that Aurelius will be the largest single tenant in the Building (occupying approximately 12.76% o

XIV. Insurance Requirements The Draft Lease sets forth the following insurance requirements for Tenant: Assessment: The insurance requirements set forth in the Draft Lease are within the market range for a lease of this size and type in Class A Manhattan office space. Aurelius's insurance broker, Caldecott Risk Advisors Ltd. (London), has confirmed that these coverage levels are obtainable within Aurelius's existing