Contract analysis

I. Executive Summary This memorandum addresses three principal tax questions that have arisen in connection with the proposed construction financing of the Hudson Yards West project (the "Project") at 450 West 34th Street, New York, New York 10001. The borrowing entities are Hudson Yards West Mortgage LLC ("HYW Mortgage LLC") and Hudson Yards West Mezzanine LLC ("HYW Mezzanine LLC"), each a Delaware limited liability

II. Scope of Analysis and Assumptions A. Documents Reviewed In preparing this memorandum, we have reviewed the following documents and materials:

1. MTDC Enabling Statute: 70 ILCS 3615/1.01 et seq. (Illinois Regional Transportation Authority Act, as amended), together with the specific provisions of 70 ILCS 3620/1 et seq. (Metropolitan Transit Development Corporation Act), which created MTDC as an independent government instrumentality of the State of Illinois.

2. MTDC Charter and Bylaws, as amended through January 15, 2024, certified by Lydia Okafor, General Counsel of MTDC.

3. Ground Lease between New York City Economic Development Corporation ("NYCEDC"), as landlord, and Metropolitan Transit Development Corporation, as tenant, dated as of June 1, 2020, recorded in the Office of the City Register of the City of New York on June 12, 2020, at CRFN 2020000198762 (the "Ground Lease").

4. Senior Mortgage Loan Term Sheet dated February 28, 2025, between Ironclad Capital Partners ("Ironclad") and HYW Mortgage LLC, setting forth the principal terms of the Senior Mortgage Loan in the amount of $475,000,000 at a rate of Term SOFR + 425 basis points (SOFR floor of 1.00%).

5. Mezzanine Loan Term Sheet dated March 7, 2025, between Granite Peak Capital Management ("Granite Peak") and HYW Mezzanine LLC, setting forth the principal terms of the Mezzanine Loan in the amount of $200,000,000 at a fixed rate of 11.50%.

6. Draft Organizational Documents for HYW Mortgage LLC and HYW Mezzanine LLC, including Certificates of Formation, Limited Liability Company Agreements, and related resolutions, provided by Grace Nakamura on March 22, 2025.

7. Uniform Land Use Review Procedure ("ULURP") Approval: Application No. C 230415 ZSM, City Planning Commission approval dated September 12, 2023, and City Council approval dated October 25, 2023.

8. Whitfield Albrecht LLP Audited Financial Statements for MTDC, for the fiscal year ended December 31, 2024 ("FY2024 Financial Statements"), including notes to financial statements and auditor's report (unqualified opinion).

9. Pinnacle Ratings Group Credit Rating Report, Report No. PRG-MTDC-A-2024-1187, dated November 8, 2024, assigning MTDC a long-term issuer credit rating of A– with stable outlook.

10. Broadstreet Appraisal Group Appraisal Report No. BAG-25-1092, dated April 1, 2025, prepared by Marcus Tolliver, MAI, concluding to an as-stabilized appraised value of the Project of $1,025,000,000 (the "Broadstreet Appraisal").

11. Various internal working drafts of the Senior Mortgage Loan Agreement, Mezzanine Loan Agreement, Mortgage, Security Agreement, and related ancillary documents, as provided by our Real Estate group. B. Factual Assumptions We have assumed the following facts for purposes of this analysis. We have not independently verified these facts and have relied on the representations of MTDC, its advisors, and the documents l

III. Analysis of MTDC's Government Instrumentality Status The threshold question in this analysis is whether MTDC qualifies as a government instrumentality for tax purposes. This determination is relevant to each of the specific tax questions addressed below and must be analyzed under federal, Illinois, and New York law. A. Illinois Law — Enabling Legislation and Characteristics MTDC was created pursuant to the Metro

1. Delegation of Sovereign Power. Whether the entity has been delegated the right to exercise one or more sovereign powers, such as the power of eminent domain, the police power, or the power to tax. MTDC has been delegated the power of eminent domain under Section 15 of the Enabling Act.

2. Government Control. Whether the entity is subject to control or supervision by a governmental unit. MTDC's Board of Directors is composed predominantly of gubernatorial and mayoral appointees, and MTDC is subject to the Illinois Open Meetings Act and FOIA.

3. Government Financial Interest. Whether the state or political subdivision has a financial interest in the entity, including the right to receive assets upon dissolution. Under Section 25 of the Enabling Act, upon dissolution of MTDC, all remaining assets revert to the State of Illinois.

4. Government-Appointed Governing Body. Whether the entity's governing body is appointed by governmental officials. As discussed above, a majority of MTDC's Board members are appointed by the Governor, with additional members appointed by the Mayor of Chicago and the President of the Cook County Board.

5. Tax-Exempt Purpose. Whether the entity was created to serve a public or governmental purpose. MTDC was created for the express purpose of promoting and developing transit-oriented projects in the public interest.

6. Designation as Instrumentality. Whether the entity is designated as an instrumentality of the state by its enabling legislation. The Enabling Act expressly designates MTDC as "an instrumentality of the State of Illinois." Applying these factors, we conclude that MTDC satisfies each of the criteria for classification as a government instrumentality of the State of Illinois for federal tax purposes. MTDC's income fr

IV. Federal Income Tax Treatment of Loan Interest A. IRC § 103 — Tax-Exempt Bond Analysis

Section 103(a) of the Internal Revenue Code provides that, except as provided in subsections (b) and (c), gross income does not include interest on any state or local bond. For this purpose, a "state or local bond" is defined under IRC § 103(c)(1) as an obligation of a state or political subdivision thereof. The question presented is whether the Senior Mortgage Loan ($475,000,000) or the Mezzanine Loan ($200,000,000)

V. New York Mortgage Recording Tax Analysis A. Statutory Framework — NY Tax Law Article 11 (§§ 250–262) The New York mortgage recording tax is imposed by Article 11 of the New York Tax Law (§§ 250–262) on the recording of mortgages of real property within the State of New York. The tax is calculated based on the principal debt or obligation secured by the mortgage, and the applicable rates vary depending on the locat

Section 252 of the New York Tax Law provides an exemption from MRT for mortgages made to or by certain governmental entities. Specifically, § 252 exempts from the MRT any mortgage given by the State of New York, any political subdivision thereof, or any public benefit corporation, and any mortgage given by the United States or any instrumentality thereof. Section 252 also contains a broader provision exempting mortga

1. Structure the mortgage to maximize exemption potential. The preferred approach is for MTDC to serve as co-mortgagor or direct mortgagor, with HYW Mortgage LLC as borrower under the loan agreement only. This structure provides the strongest basis for claiming the § 252 exemption.

2. Discuss the modified structure with Clearfield & Associates (Harrison Whitmore) to determine whether Ironclad will accept MTDC as mortgagor, and if so, what additional protections or modifications to the loan documents may be required.

3. As a fallback, budget for the full MRT of approximately $13,300,000 as a closing cost, and seek the exemption as a potential cost saving. If the exemption is claimed and challenged, the parties should be prepared to pay the MRT and seek a refund through administrative or judicial proceedings.

4. Consider requesting a DTF advisory opinion on the exemption, recognizing that such an opinion is unlikely to be obtained prior to the June 15, 2025 closing date. A post-closing advisory opinion could still be valuable if the exemption is claimed at closing and subsequently challenged.

VI. New York City Real Property Tax Analysis A. General Taxability of the Project The Project is located at 450 West 34th Street, in the Borough of Manhattan, City of New York (Block 729, Lots 1, 5, 12, and 15). For New York City real property tax purposes, the Project will be classified as Class 4 commercial property. The current Class 4 tax rate for the 2024–2025 fiscal year is approximately 10.684% of assessed val

Section 404(1) of the New York Real Property Tax Law provides that real property owned by the United States, the State of New York, or any public corporation shall be exempt from taxation. The term "public corporation" is defined in the New York General Construction Law § 66 to include a municipal corporation or a district corporation, as well as a public benefit corporation. RPTL § 404 is the primary basis for the e

Section 412-a of the RPTL provides an exemption from real property tax for property owned by or used for the purposes of public transit or transportation. This section was enacted to promote the development and maintenance of transit infrastructure and facilities. Applicability to the Project. The Project includes approximately 45,000 square feet of public transit infrastructure improvements, including a below-grade

VII. Transfer Tax Considerations A. New York State Real Estate Transfer Tax (RETT) The New York State Real Estate Transfer Tax ("RETT") is imposed under Article 31 of the New York Tax Law (§§ 1400–1412) on the conveyance of real property or interests therein within the State of New York. The RETT rate is $2.00 per $500 of consideration (0.4%), with an additional "mansion tax" surcharge applicable to residential prope

VIII. Federal Tax-Exempt Entity Considerations A. MTDC's Federal Tax-Exempt Status under IRC § 115 As discussed in Section III.B above, MTDC's income from the exercise of essential governmental functions is excluded from gross income under IRC § 115(1). This exclusion extends to income earned by MTDC through its