Contract analysis

I. Executive Summary The purpose of this memorandum is to provide a preliminary analysis of the proposed two-tranche financing structure for the mixed-use development project located at 450 West 34th Street, New York, New York 10001 (the "Project" or "Hudson Yards West"), and to identify and flag structural, regulatory, and lien-law issues requiring resolution before first-draft loan documents are circulated to the p

1. A dual-SPE borrower stack, consisting of a mortgage borrower (Hudson Yards West Mortgage LLC) and a mezzanine borrower (Hudson Yards West Mezzanine LLC), both to be newly formed Delaware limited liability companies wholly owned, directly or indirectly, by MTDC.

2. A non-recourse carve-out guaranty to be executed by MTDC in its capacity as a government instrumentality organized under the laws of the State of Illinois, which raises unique questions regarding sovereign immunity, enforceability, and board authorization.

3. An intercreditor agreement between Ironclad (as administrative agent for the senior lenders) and Granite Peak (as mezzanine lender), governing the respective rights, remedies, and priorities of the two tranches of debt.

4. Compliance with New York Lien Law Article 2, including the requisite bifurcation of the senior mortgage loan into a building loan component and a project loan component, with attendant filing and recording requirements. This memorandum references the senior mortgage term sheet, which has been circulated in draft form and is anticipated to be executed on or about February 28, 2025, as well as the mezzanine term she

II. Transaction Overview A. The Project The Project, known as "Hudson Yards West," is a large-scale mixed-use development to be constructed on a site located at 450 West 34th Street, in the Borough of Manhattan, City and County of New York, State of New York. The site is identified on the Tax Map of the City of New York as Block 729, Lots 1, 5, 12, and 15. MTDC holds its interest in the Project site pursuant to a gro

III. SPE Borrower Structure A. Proposed Entity Stack The proposed transaction utilizes a two-tier special-purpose entity ("SPE") structure that is standard for financings of this type, consisting of a mortgage borrower and a mezzanine borrower, each organized as a Delaware limited liability company. The structure is as follows: MTDC (Illinois government instrumentality) ↓ (sole member) Hudson Yards West Mezzanine LLC

IV. Senior Mortgage Loan — Key Terms and Issues A. Basic Terms Based on the draft senior mortgage term sheet most recently circulated to the parties (and anticipated to be executed on or about February 28, 2025), the basic terms of the senior mortgage loan are as follows: Lender: Ironclad National Bank, N.A. ("Ironclad"), acting as administrative agent. The senior mortgage loan is expected to be syndicated to a group

1. Payment of debt service (interest and, if applicable, principal amortization) on the senior mortgage loan;

2. Funding of required reserve accounts (tax and insurance escrows, capital expenditure reserves, tenant improvement / leasing commission reserves, ground rent reserves);

3. Payment of approved operating expenses of the Project (including property management fees, insurance premiums, and other operating costs);

4. If no cash sweep trigger is in effect, distribution of remaining excess cash flow to HYW Mezzanine (and ultimately to MTDC), subject to the mezzanine lender's intercreditor rights. During the construction period, disbursements of loan proceeds will be made pursuant to the construction budget and draw schedule through a controlled disbursement account maintained at Ironclad. Ironclad will serve as the disbursing ag

V. Mezzanine Loan — Key Terms and Issues A. Basic Terms Based on the draft mezzanine term sheet currently under negotiation (with execution expected on or about March 7, 2025), the basic terms of the mezzanine loan are as follows: Lender: Granite Peak Capital Partners, LP ("Granite Peak"), a Delaware limited partnership. Borrower: Hudson Yards West Mezzanine LLC ("HYW Mezzanine"), the mezzanine borrower SPE described

VI. Non-Recourse Carve-Out Guaranty A. Guarantor: MTDC Both the senior mortgage loan and the mezzanine loan are each structured as non-recourse obligations of the respective borrower SPE. Under this structure, the lenders' recourse upon a default is limited to the collateral securing their respective loans — the real property (in the case of Ironclad) and the pledged membership interests (in the case of Granite Peak)

VII. New York Lien Law Compliance — Building Loan / Project Loan Bifurcation A. Overview of NY Lien Law Requirements New York Lien Law Article 2, and in particular Sections 2, 13, and 22 thereof, imposes specific requirements on lenders whose loans are used to finance the "improvement of real property" in the State of New York. These requirements are critically important to this transaction and are among the most tec