Contract analysis

I. EXECUTIVE SUMMARY OF KEY OBSERVATIONS A. Overview Calderwood & Harkness LLP ("C&H") was engaged by Metropolitan Transit Development Corp. ("MTDC") on February 12, 2025 to serve as borrower's counsel in connection with the proposed senior mortgage financing for the Hudson Yards West mixed-use transit-oriented development project located at 450 West 34th Street, New York, NY 10001 (the "Project"). This annotated mar

1. Definition and Calculation of "Term SOFR." The Term Sheet references "Term SOFR" as the benchmark rate but does not specify the particular variant (e.g., CME Term SOFR, 1-month vs. 3-month tenor) or provide a fallback waterfall in the event that Term SOFR becomes unavailable. MTDC should insist on inclusion of a benchmark replacement waterfall consistent with the Alternative Reference Rates Committee ("ARRC") reco

2. SOFR Floor of 1.00%. The Term Sheet imposes a floor of 1.00% on the Term SOFR component of the interest rate. While current Term SOFR levels are well above this floor, the provision creates an asymmetric pricing mechanism that disadvantages the Borrower in a declining rate environment. C&H recommends requesting deletion of the SOFR floor entirely or, alternatively, a reduction to 0.50%. At minimum, MTDC should arg

3. Extension Conditions — Debt Yield Test and Leasing Milestones. The extension conditions are among the most critical negotiation points in the Term Sheet and, as currently drafted, are overly restrictive. First, the debt yield test at extension should be measured against actual in-place Net Operating Income ("NOI") on a trailing twelve-month annualized basis, rather than against underwritten or projected NOI. The d

4. Cash Management — Relationship Between DSCR Covenant and Cash Sweep Trigger. The Term Sheet requires a hard lockbox with a springing cash sweep triggered when the combined Debt Service Coverage Ratio ("DSCR") falls below 1.10x. However, the DSCR financial covenant is set at 1.20x. This means the cash sweep does not trigger until 10 basis points below the level at which the Borrower is already in covenant default —

5. Mezzanine Debt Consent Provisions and Intercreditor Agreement. The Term Sheet acknowledges the existence of the $200,000,000 mezzanine loan from Granite Peak Capital Partners, LP, but is nearly silent on the form and substance of the required intercreditor agreement. This is the most complex document in the transaction and must be addressed before definitive loan documents are finalized. Key intercreditor issues i

6. Recourse Carve-Outs — Scope of "Bad Boy" Guaranty. The Term Sheet references standard "bad boy" carve-out guaranties but does not specify the scope of the carve-out events. Given that MTDC is a government instrumentality organized under Illinois law, the scope of any guaranty must be carefully reviewed against MTDC's enabling legislation and any limitations on its authority to pledge credit. C&H recommends that th

7. SPE Covenants. HYW Mortgage LLC, the proposed borrower entity, has not yet been formed. The Term Sheet imposes separateness covenants on the borrower entity that must be coordinated with the Delaware formation and organizational documents. C&H will prepare these documents, but MTDC should be aware that the SPE requirements — including the potential requirement for an independent director — will impose ongoing gove

8. Ground Lease Subordination / Estoppel. The Project is located on a ground-leased site pursuant to a ground lease executed June 1, 2020 by the New York City Economic Development Corporation ("NYCEDC") to MTDC, recorded at CRFN 2020000198762. The ground lease must be confirmed as financeable — i.e., it must contain adequate lender protection provisions, including notice and cure rights for leasehold mortgagees, new

9. Insurance Requirements. The Term Sheet requires builder's risk coverage at $500,000,000 replacement cost, to be provided by Fortis Indemnity Insurance Co. C&H recommends confirming the adequacy and availability of this coverage with MTDC's insurance broker, Castleton Insurance Brokerage (Brian Jessup), and coordinating with Trident Structural Engineers (Dr. Rajesh Banerjee) on the replacement cost estimate. Additi

10. Prepayment — Senior Exit Fee. The Term Sheet imposes an exit fee of 0.25% of the outstanding principal balance, payable upon prepayment or maturity payoff. C&H recommends negotiating that the exit fee not apply upon (i) repayment at scheduled maturity (initial or extended), (ii) application of casualty or condemnation proceeds, or (iii) a refinancing where Ironclad is the refinancing lender. The exit fee should a

II. PARTIES A. Term Sheet Text The Term Sheet identifies the following parties to the proposed Senior Mortgage Loan: Borrower: Hudson Yards West Mortgage LLC ("Mortgage Borrower" or "Borrower"), a Delaware limited liability company to be formed, intended to be a special purpose entity wholly owned by Metropolitan Transit Development Corp. ("MTDC" or "Guarantor"). Lender / Administrative Agent: Ironclad National Bank,

III. PROPERTY / COLLATERAL A. Term Sheet Text Project Site: 450 West 34th Street, New York, NY 10001 (Block 729, Lots 1, 5, 12, and 15, Borough of Manhattan, City of New York). Description: The Project consists of a ground-up mixed-use transit-oriented development to be constructed on the Project Site, which is located in the Hudson Yards district of Manhattan. The development program includes commercial office space

IV. LOAN AMOUNT A. Term Sheet Text Senior Mortgage Loan Amount: Four Hundred Seventy-Five Million Dollars ($475,000,000). The Term Sheet indicates that the Senior Mortgage Loan will be structured as a construction facility, with funding disbursed over the course of the construction period based on achievement of construction milestones and satisfaction of draw conditions. The specific draw structure — whether a singl

V. INTEREST RATE A. Term Sheet Text Interest Rate: Term SOFR plus a spread of four hundred twenty-five (425) basis points per annum (4.25%). SOFR Floor: One percent (1.00%). In the event that Term SOFR is less than 1.00% at any time during the term of the Senior Mortgage Loan, Term SOFR shall be deemed to be 1.00% for purposes of calculating the interest rate. Interest Accrual: Interest shall accrue on the basis of a

VI. LOAN TERM AND MATURITY A. Term Sheet Text Initial Term: Four (4) years from the Closing Date. • Closing Date: June 15, 2025 • Initial Maturity Date: June 15, 2029 Extension Options: The Borrower shall have the right to extend the maturity of the Senior Mortgage Loan for two (2) successive one (1)-year extension periods, exercisable at the Borrower's option, subject to the satisfaction of the Extension Conditions

VII. ORIGINATION FEE AND EXPENSES A. Term Sheet Text Origination Fee: One percent (1.00%) of the Senior Mortgage Loan amount, equal to Four Million Seven Hundred Fifty Thousand Dollars ($4,750,000), payable to Agent at closing. Expenses: Borrower shall pay all reasonable and documented costs and expenses incurred by the Lender in connection with the Senior Mortgage Loan, including without limitation (a) the fees and

VIII. PREPAYMENT A. Term Sheet Text Lockout Period: A hard lockout period during which no voluntary prepayment of the Senior Mortgage Loan shall be permitted. The duration of the lockout period is to be determined in the definitive loan documents; the anticipated range is twelve (12) to twenty-four (24) months from closing. Prepayment Premium / Exit Fee: Following the expiration of the lockout period, the Borrower ma

IX. RESERVES AND ESCROWS A. Term Sheet Text The following reserve accounts shall be established and maintained in connection with the Senior Mortgage Loan, in each case on terms and conditions to be specified in the definitive loan documents: (i) Interest Reserve. An interest reserve in an amount sufficient to fund interest payments during the construction period. (ii) Real Estate Tax Escrow. Monthly deposits for rea