Dear Tom,
I hope this message finds you well. I am writing on behalf of our client, Aurelius Media Holdings Inc. ("Tenant"), to transmit Tenant's initial comments and proposed revisions to the form of Subordination, Non-Disturbance and Attornment Agreement (the "SNDA") that your office circulated on behalf of Atlas Continental Bank, N.A. ("Lender") on June 8, 2023.
**Background**
As you know, the SNDA arises in connection with the Agreement of Lease (the "Lease") between Greystone Metropolitan Realty LLC ("Landlord") and Tenant for approximately 185,000 rentable square feet on Floors 34 through 38 at 787 Seventh Avenue, New York, NY 10019 (commonly known as Greystone Tower). The SNDA is a tri-party agreement among Lender, as holder of the first mortgage lien on the Building (recorded January 15, 2019; outstanding principal balance of approximately $620 million), Landlord as borrower, and Tenant. Delivery of an executed SNDA is a condition precedent to the Commencement Date under the Lease, and accordingly the parties share an interest in bringing the SNDA to closure on an expeditious basis.
Attached for your review is our redline markup of the initial SNDA form, together with margin comments explaining the basis for each proposed revision. See **SNDA - Tenant Redline (06.20.2023).docx**. I have set forth below a summary of the principal areas addressed in Tenant's markup to facilitate your initial review and any internal discussions with Lender.
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**1. Non-Disturbance Protections**
This is the central issue for Tenant. Tenant requires an unqualified commitment that, following any foreclosure, deed-in-lieu of foreclosure, or other exercise of remedies by Lender, Tenant's occupancy, possession, and all rights under the Lease will be preserved and recognized, provided Tenant is not then in default under the Lease beyond applicable notice and cure periods.
As currently drafted, the non-disturbance protections in the initial form are too narrowly drawn, extending only to Tenant's right of "quiet possession" of the demised premises. Tenant's redline broadens the non-disturbance covenant to encompass all rights "under or appurtenant to the Lease," including, without limitation:
- Tenant's expansion option with respect to Floors 39 and 40; - Tenant's right of first offer with respect to Floors 30 through 33; - Tenant's renewal options; - Tenant's signage rights; and - All other options, rights, and privileges set forth in the Lease.
The initial form does not expressly address the survival of these rights in a foreclosure scenario. Given their significance to Tenant's business operations and its decision to enter into the Lease, we have added express language confirming that each of these rights survives and is binding on any successor landlord.
Additionally, Tenant's redline provides that any successor landlord — whether Lender itself or a purchaser at a foreclosure sale — shall be bound by all of Landlord's obligations under the Lease, including but not limited to (a) the tenant improvement allowance disbursement obligations, (b) the security deposit and letter of credit return obligations, and (c) the applicable burn-down schedule for the security deposit.
**2. Tenant Cure Rights**
Tenant's markup adds a provision ensuring that Tenant will have the benefit of the same notice and cure periods provided under the Lease before Lender may take any action to terminate the Lease or Tenant's rights thereunder on account of any alleged Lease default.
In addition, Tenant requests that Lender provide Tenant with copies of any notices of default or acceleration delivered to Landlord under the mortgage or loan documents, together with an opportunity of not less than thirty (30) days to cure any landlord/borrower default under the mortgage to the extent such default could result in termination of the Lease. This is a standard protective provision designed to ensure that Tenant has a meaningful opportunity to protect its leasehold interest from the consequences of a borrower default over which Tenant has no control.
For the avoidance of doubt, Tenant's redline makes clear that Tenant shall not be subject to termination, eviction, or dispossession as a consequence of any default by Landlord under the mortgage or loan documents.
**3. Insurance and Condemnation Proceeds**
Section 7 of the initial SNDA form vests Lender with absolute control over insurance and condemnation proceeds. This provision, as drafted, conflicts with provisions of the Lease that require Landlord to apply insurance proceeds toward restoration and rebuilding of the Premises following a casualty, and to apply condemnation proceeds similarly in the event of a partial taking.
Tenant's redline proposes that, to the extent the Lease requires Landlord to restore the Premises following a casualty or partial condemnation, Lender will make the applicable insurance or condemnation proceeds available for such restoration in accordance with the terms of the Lease. At minimum, Lender should agree not to exercise its rights under the mortgage to apply such proceeds to the outstanding loan balance in a manner that would prevent restoration as required under the Lease.
In the alternative, if Lender elects to divert proceeds to the loan balance and restoration does not occur, Tenant's termination rights under the Lease in the event of non-restoration must be expressly preserved.
**4. Subordination and Attornment**
Tenant is prepared to subordinate its leasehold interest to the lien of the mortgage, provided the non-disturbance protections described above are satisfactorily agreed. Tenant will attorn to Lender or any successor landlord following foreclosure, on the condition that such successor landlord assumes all of Landlord's obligations under the Lease arising from and after the date of such succession.
Tenant's redline clarifies that the attornment obligation does not impose any liability on Tenant beyond what is set forth in the Lease, does not modify any of Tenant's rights under the Lease, and does not constitute a waiver of any claims Tenant may have against the prior landlord.
**5. Miscellaneous**
Tenant's markup also addresses the following points:
- **Governing Law.** Tenant requests that the SNDA be governed by the laws of the State of New York, consistent with the governing law provision of the Lease.
- **Lender's Representation Regarding No Existing Default.** Tenant requests that Lender represent and warrant that, as of the date of the SNDA, Lender has not delivered any notice of default to Landlord under the mortgage or loan documents.
- **Letter of Credit.** The Lease security includes a letter of credit (L/C No. SNLC-2023-08015, in the amount of $5,180,000, issued by Caledonian National Bank PLC), subject to a burn-down schedule. Tenant requests confirmation that Lender will recognize Tenant's rights with respect to the L/C and the applicable burn-down schedule, and that Lender will not intercept, draw upon, or assert any claim to the L/C in connection with any foreclosure proceeding or exercise of remedies under the mortgage.
- **Successors and Assigns.** Tenant requests that the SNDA expressly run with the land and be binding upon Lender's successors and assigns, including any subsequent mortgagee, assignee of the mortgage, or purchaser at a foreclosure sale.
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**Process and Scheduling**
We understand that the parties are targeting agreement on the final Lease form by July 1, 2023, and that the SNDA needs to be executed in advance of the anticipated Commencement Date of August 1, 2023. With that timeline in mind, we are happy to schedule a call at your earliest convenience to discuss any of the foregoing. If it would be productive to include Patricia Delgado at Atlas Continental Bank in that conversation, we are glad to coordinate accordingly.
I have copied Diane Ashford at Pemberton Locke & Strauss LLP, counsel to Landlord, given Landlord's interest as a party to the SNDA and in seeing the agreement finalized on a timely basis.
Please let me know if you have any initial reactions to the attached markup, or if you would like to propose a time to discuss. We are available at your convenience.
Thank you very much for your attention to this, Tom. We look forward to working through these comments efficiently and reaching a mutually acceptable form of SNDA.
Best regards,
Rafael Dominguez Calderwood & Harkness LLP 425 Park Avenue, 18th Floor New York, NY 10022 Tel: (212) 506-4130 Email: rdominguez@calderwoodharkness.com Matter No. 1017-00009