Contract analysis

I. Executive Summary This memorandum analyzes the New York State and New York City mortgage recording tax ("MRT") applicable to the recording of the $475,000,000 senior mortgage (the "Senior Mortgage") to be granted by Hudson Yards West Mortgage LLC ("HYW Mortgage" or the "Mortgage Borrower"), a Delaware limited liability company, in favor of Ironclad National Bank, N.A. ("Ironclad" or the "Agent"), as administrative

II. Scope and Assumptions This memorandum is based upon, and our analysis proceeds from, the following facts, assumptions, and defined terms. To the extent any assumption is incorrect or any fact changes, our conclusions should be re-evaluated and may differ. Mortgage Borrower. Hudson Yards West Mortgage LLC ("HYW Mortgage" or the "Mortgage Borrower") is a Delaware limited liability company organized as a single-purp

III. Applicable Mortgage Recording Tax Framework New York imposes a mortgage recording tax on the privilege of recording a mortgage on real property located within the State. The tax is composed of several components — a state basic tax, a state additional tax, and a city tax (itself comprising multiple components) — each of which is described below as applied to the Senior Mortgage. A. New York State Basic Tax (Tax

IV. Government Instrumentality Exemption Analysis A. Statutory Framework (Tax Law § 252) New York Tax Law § 252 sets forth the exemptions from the State MRT imposed under § 253. Subdivision 1 of § 252 provides, in relevant part, that the following mortgages are exempt from the tax: "A mortgage or deed of trust given by or to the state of New York or by or to any municipality, political subdivision, district, or other

V. CEMA / Consolidation, Extension and Modification Agreement Analysis A. Overview of CEMA Structure and Tax Savings Mechanism The Consolidation, Extension and Modification Agreement ("CEMA") is the principal MRT mitigation tool in New York real estate finance. A CEMA transaction enables a borrower that is refinancing or replacing an existing mortgage to avoid paying MRT on the full amount of the new mortgage by "con

VI. Alternative MRT Reduction Strategies In light of the unavailability of both the governmental exemption and CEMA savings, we have evaluated several alternative strategies that might reduce the $13,300,000 MRT liability. As discussed below, none of these alternatives offers material relief under the current transaction structure. A. Split Mortgage / Multi-Note Structure Under a split-mortgage or multi-note structur

VII. Building Loan Agreement Considerations Because the Senior Loan is a "building loan" within the meaning of N.Y. Lien Law Article 2, a building loan agreement must be prepared and filed simultaneously with the Senior Mortgage. The building loan agreement requirements and their interaction with MRT are discussed below. Under N.Y. Lien Law § 22, a "building loan contract" — defined as "a contract whereby a party the

VIII. Mezzanine Loan — Confirmation of Non-Applicability of MRT The $200,000,000 mezzanine loan from Granite Peak Capital Partners, LP (the "Mezzanine Loan") is secured by a pledge of 100% of the membership interests in HYW Mortgage LLC held by HYW Mezzanine LLC. This is a security interest in personal property — specifically, a "general intangible" (or, more precisely, a "membership interest" in a limited liability