PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Douglas Fairchild, Responsible Partner, Real Estate Practice Group
FROM: Cynthia Ho, Working Associate, Real Estate Practice Group
DATE: June 12, 2023
RE: Title Commitment Review — Leasehold Interest at 787 Seventh Avenue, New York, NY 10019 (Block 1024, Lot 18, Borough of Manhattan) — Greystone Tower
MATTER NO.: 1017-00009
CLIENT: Aurelius Global Media Group PLC / Aurelius Media Holdings Inc.
STATUS: Privileged and Confidential — Attorney Work Product
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I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP has received and reviewed the leasehold title commitment (the "Commitment") issued by Commonwealth Fidelity Title Insurance Co. ("Commonwealth Fidelity"), bearing Policy No. LTP-2023-07842, dated June 9, 2023. The Commitment was delivered to our office on June 10, 2023, and this memorandum sets forth the results of our comprehensive review of that Commitment and our recommendations regarding actions to be taken prior to lease execution and policy issuance.
The Commitment covers the proposed leasehold interest of Aurelius Media Holdings Inc., a Delaware corporation ("Tenant" or "Aurelius"), in approximately 185,000 rentable square feet ("RSF") on Floors 34, 35, 36, 37, and 38 at 787 Seventh Avenue, New York, NY 10019, also known as Greystone Tower (the "Building"). The property is identified on the New York City tax map as Block 1024, Lot 18, Borough of Manhattan, City, County, and State of New York (the "Property"). The fee owner of record is Greystone Metropolitan Realty LLC, a Delaware limited liability company ("Landlord" or "Greystone").
The proposed leasehold estate arises from the Agreement of Lease (the "Lease") currently being negotiated between Landlord and Tenant, which will provide for a fifteen (15) year lease term commencing August 1, 2023, with rent commencement on February 1, 2024, and two (2) successive five (5) year renewal options.
Summary Conclusion: The Commitment is generally acceptable, subject to the following conditions:
(a) resolution of certain title exceptions as described herein, and most notably the exception for the first mortgage lien held by Atlas Continental Bank, N.A.;
(b) delivery of a fully executed Subordination, Non-Disturbance and Attornment Agreement ("SNDA") from Atlas Continental Bank, N.A. in favor of Aurelius Media Holdings Inc., as a condition precedent to policy issuance and as required under the Lease itself; and
(c) procurement of certain endorsements recommended herein, including an SNDA/non-disturbance endorsement, a survey/location endorsement, a zoning endorsement, and other standard leasehold endorsements.
No title defects have been identified that would, in our judgment, prevent the consummation of the transaction, provided that the action items described in this memorandum are satisfactorily completed on or before the targeted lease execution date.
II. IDENTIFICATION OF THE COMMITMENT
A. Title Company and Policy Information
The following summarizes the key identifying information for the Commitment:
The Commitment was issued in the standard ALTA 2006 form as modified for use in the State of New York, consistent with requirements for commercial leasehold title insurance in Manhattan. The Commitment is subject to all of the terms, conditions, exclusions, and requirements set forth therein, including those enumerated in Schedules A, B-I, and B-II, each of which is analyzed in detail below.
B. Proposed Insured
The proposed insured under the Commitment is:
Aurelius Media Holdings Inc., a Delaware corporation (Delaware Division of Corporations File No. 7318294), as tenant under the Agreement of Lease to be entered into with Greystone Metropolitan Realty LLC with respect to Floors 34 through 38 at 787 Seventh Avenue, New York, NY 10019.
Aurelius Media Holdings Inc. is a wholly owned indirect subsidiary of Aurelius Global Media Group PLC, a public company organized under the laws of England and Wales and listed on the London Stock Exchange (ticker: AGMG). The Tenant entity was formed for the purpose of, among other things, holding the leasehold interest in the Premises as the operational headquarters for the parent company's North American media, entertainment, and e-commerce operations.
C. Property Description
The legal description of the Property as set forth in the Commitment is as follows:
Block 1024, Lot 18, Borough of Manhattan, City, County and State of New York, together with all improvements thereon and appurtenances thereto.
The Property is commonly known as 787 Seventh Avenue, New York, NY 10019, and is referred to as "Greystone Tower." The Building is a Class A, LEED Gold certified, 52-story office tower constructed in 2001. The total building rentable area is approximately 1,450,000 RSF. The Building is situated in the heart of Midtown Manhattan, on the east side of Seventh Avenue between West 51st Street and West 52nd Street, within the Midtown Central Business District.
The insured premises (the "Premises") consist of the entire rentable area on Floors 34, 35, 36, 37, and 38 of the Building, comprising approximately 185,000 RSF (approximately 37,000 RSF per floor). The Premises will serve as the North American headquarters for Aurelius Global Media Group PLC and its operating subsidiaries.
D. Fee Owner of Record
The fee owner of record as reflected in the Commitment is:
Greystone Metropolitan Realty LLC, a Delaware limited liability company (Delaware Division of Corporations File No. 5820416).
Principal Office: 600 Lexington Avenue, 32nd Floor, New York, NY 10022.
Greystone Metropolitan Realty LLC is the entity that holds fee simple title to the Property and is the entity with which the Tenant will enter into the Lease. Additional detail regarding Greystone's ownership structure and organizational authority is provided in Section VI below.
E. Amount of Insurance
The amount of insurance to be provided under the leasehold title policy has not yet been finally determined and is shown in the Commitment as "To Be Determined." We recommend that the amount of insurance be set at a level reflecting the aggregate base rent obligation under the Lease over the initial fifteen (15) year term, which based on the current rent schedule is approximately $90,000,000. Alternatively, the amount of insurance may be set at such other amount as the client directs, taking into account factors such as the value of Tenant's improvements, the cost of relocation, and the overall value of the leasehold estate to Aurelius. We will coordinate with Tariq Nassar, General Counsel of Aurelius, and Vivienne Caldwell, SVP, Global Real Estate & Facilities, regarding the client's preference on the insurance amount, and we will advise Commonwealth Fidelity accordingly prior to policy issuance.
III. SCHEDULE A — REQUIREMENTS
Schedule A of the Commitment sets forth the conditions and requirements that must be satisfied in order for Commonwealth Fidelity to issue the leasehold owner's title insurance policy. These requirements are divided into standard requirements and special requirements, each of which is discussed below.
A. Standard Requirements
The Commitment contains the following standard requirements, each of which is customary for a leasehold title policy of this nature:
1. Execution and Delivery of the Agreement of Lease. Commonwealth Fidelity requires the execution and delivery of the Agreement of Lease by and between Greystone Metropolitan Realty LLC, as Landlord, and Aurelius Media Holdings Inc., as Tenant, covering the Premises at Floors 34 through 38 at 787 Seventh Avenue. The Lease must be in the form submitted to Commonwealth Fidelity or in such final form as is approved by the title company. We anticipate delivering a copy of the fully executed Lease to Commonwealth Fidelity promptly following execution, which is currently targeted for on or about July 13, 2023.
2. Delivery of Proof of Authority of the Parties. Commonwealth Fidelity requires delivery of satisfactory evidence of the authority of the respective parties to enter into the Lease, including board resolutions or written consents authorizing the transaction, officer's certificates, and certificates of good standing from the respective jurisdictions of formation (Delaware for both Landlord and Tenant) and the jurisdiction of the transaction (New York). In the case of Tenant, this will include a certified copy of the board resolution of Aurelius Media Holdings Inc. authorizing the execution of the Lease and a certificate of good standing from the Delaware Secretary of State and the New York Department of State. In the case of Landlord, this will include evidence of the authority of the person(s) executing the Lease on behalf of Greystone Metropolitan Realty LLC, including any required operating agreement provisions or manager consents, as discussed in greater detail in Section VI below.
3. Payment of the Applicable Title Insurance Premium. Commonwealth Fidelity requires payment of the applicable leasehold title insurance premium in accordance with its filed rate schedule. The premium amount will be calculated based on the final insured amount and the applicable rate for leasehold owner's title insurance policies in New York County. We will provide the client with a premium estimate once the insured amount has been determined.
4. Delivery of Copies of All Documents Creating the Insured Leasehold Estate. Commonwealth Fidelity requires delivery of copies of all instruments and documents creating or evidencing the insured leasehold estate, including without limitation the fully executed Agreement of Lease and any amendments, modifications, or supplements thereto, as well as a memorandum of lease if one is to be recorded.
These standard requirements are customary and expected. We do not anticipate any difficulty in satisfying them in the ordinary course of the transaction.
B. Special Requirements
In addition to the standard requirements described above, the Commitment contains the following special requirements, which require particular attention and action:
1. Delivery of a Fully Executed SNDA from Atlas Continental Bank, N.A. The Commitment requires, as a condition precedent to the issuance of the leasehold title policy, the delivery of a fully executed Subordination, Non-Disturbance and Attornment Agreement ("SNDA") from Atlas Continental Bank, N.A. (the "Lender" or "Atlas"), the existing first mortgagee on the Property, in favor of Aurelius Media Holdings Inc. The SNDA must be in form and substance satisfactory to Commonwealth Fidelity.
This is the most significant special requirement and corresponds to the most significant title exception identified in the Commitment. The SNDA is discussed in detail in connection with Exception No. 1 in Section V.B below.
SNDA negotiations with Atlas Continental Bank, N.A. and its counsel, Halsted & Brinkley LLP (Thomas Brinkley, Partner; 200 Park Avenue, Suite 2400, New York, NY 10166), are expected to commence on or about June 20, 2023. The SNDA must provide, at a minimum, that Tenant's occupancy and lease rights will not be disturbed in the event of foreclosure or deed-in-lieu of foreclosure, so long as Tenant is not in default under the Lease. The Lease itself requires the delivery of the SNDA as a condition precedent to the Commencement Date (August 1, 2023).
2. Delivery of Evidence of Greystone's Authority. Commonwealth Fidelity requires delivery of evidence of the authority of Greystone Metropolitan Realty LLC to act as fee owner of the Property and to enter into the Lease, including the LLC's operating agreement (or relevant excerpts thereof) or a certificate of authority from an authorized representative of Greystone confirming the authority of the person(s) executing the Lease on behalf of the company.
3. Delivery of a Survey Acceptable to Commonwealth Fidelity. The Commitment requires delivery of a current ALTA/NSPS Land Title Survey of the Property, prepared by a licensed surveyor and certified to Commonwealth Fidelity and Aurelius Media Holdings Inc. A separate survey and zoning review memorandum is being prepared by the undersigned and is expected to be completed by June 15, 2023.
4. Payment of All Real Property Taxes and Assessments. Commonwealth Fidelity requires confirmation that all real property taxes, water charges, sewer rents, and assessments on the Property are paid current through the date of policy issuance, with no outstanding delinquencies.
5. Confirmation of No Mechanics' Liens or Notices of Pendency. Commonwealth Fidelity requires confirmation that no mechanics' liens, notices of pendency, or other involuntary liens have been filed against the Property as of the date of policy issuance. Given that the Building was constructed in 2001 and that any current construction activity in the Building would be the responsibility of the fee owner, we do not anticipate any issues in this regard. However, we will confirm with Landlord's counsel that no such liens have been filed and will coordinate with Commonwealth Fidelity on the timing of the final gap search (discussed in Section IX.D below).
IV. SCHEDULE B-I — REQUIREMENTS TO BE SATISFIED PRIOR TO ISSUANCE
Schedule B-I of the Commitment reiterates and expands upon the conditions precedent that must be satisfied prior to the issuance of the leasehold owner's title insurance policy. The following is a comprehensive list of the Schedule B-I requirements:
1. Executed Agreement of Lease. A fully executed counterpart of the Agreement of Lease between Greystone Metropolitan Realty LLC and Aurelius Media Holdings Inc., covering Floors 34 through 38 at 787 Seventh Avenue, must be delivered to Commonwealth Fidelity. The Lease must reflect the terms and conditions upon which the leasehold estate is to be insured, including the lease term, rental obligations, renewal options, and all material covenants and conditions.
2. Executed SNDA from Atlas Continental Bank, N.A. A fully executed Subordination, Non-Disturbance and Attornment Agreement from Atlas Continental Bank, N.A., in form and substance satisfactory to Commonwealth Fidelity, must be delivered. As noted above, the SNDA is critical to the viability of the leasehold title insurance policy and to the protection of Tenant's leasehold interest. Without the SNDA, Commonwealth Fidelity will not issue the policy, and the Tenant's lease rights would be subordinate to and potentially extinguishable by the Atlas mortgage.
3. Evidence of Good Standing. Certificates of good standing or equivalent status certificates must be delivered for both Landlord and Tenant:
(a) For Greystone Metropolitan Realty LLC: certificates of good standing from the Delaware Secretary of State (state of formation) and the New York Department of State (state of qualification/transaction).
(b) For Aurelius Media Holdings Inc.: certificates of good standing from the Delaware Secretary of State (state of formation) and the New York Department of State (state of qualification/transaction).
4. Satisfactory Survey. A current ALTA/NSPS Land Title Survey of the Property, meeting the minimum standard detail requirements established by ALTA and NSPS and including such Table A optional items as may be required by Commonwealth Fidelity, must be delivered. The survey must be certified to Commonwealth Fidelity Title Insurance Co. and Aurelius Media Holdings Inc. and must be dated no more than ninety (90) days prior to the date of policy issuance, or must be recertified as of a date within such period.
5. Gap Search. Commonwealth Fidelity will conduct a gap title search covering the period between the effective date of the Commitment (June 9, 2023) and the date of lease execution (currently targeted for July 13, 2023) to confirm that no intervening liens, encumbrances, judgments, or other matters affecting the Property have been filed or recorded during the gap period. The results of the gap search must be satisfactory to Commonwealth Fidelity as a condition to policy issuance.
We will coordinate with Commonwealth Fidelity's title officer, Margaret L. Fenton, to ensure the timely satisfaction of each of these requirements and to establish a closing timeline consistent with the anticipated lease execution date and commencement date.
V. SCHEDULE B-II — EXCEPTIONS FROM COVERAGE
Schedule B-II of the Commitment sets forth the exceptions from coverage — that is, the matters as to which the proposed leasehold title insurance policy will not provide coverage. These exceptions are divided into standard printed exceptions (which are included in all policies unless specifically deleted by endorsement) and specific exceptions arising from the title search results. Each exception is analyzed below, together with our recommendation as to whether the exception should be accepted as a permitted exception, objected to, or addressed through endorsement.
A. Standard Printed Exceptions
The Commitment includes the standard New York form exceptions customarily found in ALTA owner's policies, as modified for New York practice. These standard printed exceptions include:
(i) Rights of Parties in Possession. Rights or claims of parties in possession not shown by the public records. In the context of a multi-tenant office building, this exception refers to the rights of other tenants and occupants in the Building, as well as any other persons who may have occupancy rights not reflected in the recorded documents. This exception is addressed more specifically by Exception No. 5 (discussed in Section V.F below).
(ii) Survey Matters. Encroachments, overlaps, boundary line disputes, or other matters that would be disclosed by an accurate survey and inspection of the Property. This exception is addressed more specifically by Exception No. 6 (discussed in Section V.G below).
(iii) Mechanics' Liens. Liens arising from labor or materials furnished in connection with improvements to the Property, to the extent that such liens may not yet appear in the public records.
(iv) Taxes Not Yet Due and Payable. Real property taxes, assessments, water charges, and sewer rents that are a lien but not yet due and payable as of the effective date of the Commitment. This exception is addressed more specifically by Exception No. 2 (discussed in Section V.C below).
Recommendations Regarding Standard Printed Exceptions:
We recommend requesting the deletion of the standard survey exception upon delivery and review of a current ALTA/NSPS Land Title Survey of the Property, to be replaced with a survey endorsement identifying the specific matters disclosed by the survey (see Section VII.B below for discussion of the survey endorsement).
We further recommend requesting the deletion of the standard mechanics' lien exception upon delivery of appropriate affidavits and lien waivers from Landlord, or alternatively, the inclusion of the standard mechanic's lien affidavit exception language limiting the exception to liens arising from work performed at the direction of Landlord or its contractors of which Tenant has no knowledge.
B. Exception No. 1 — Atlas Continental Bank, N.A. First Mortgage Lien
Description:
First mortgage lien and related UCC financing statement(s) in favor of Atlas Continental Bank, N.A. ("Atlas"), a national banking association, with its principal offices at 277 Park Avenue, New York, NY 10172, securing a loan in the original principal amount of $650,000,000, together with all modifications, amendments, extensions, and supplements thereto.
Recording Information:
Recorded January 15, 2019, in the Office of the City Register, New York County, as CRFN 2019000021384 (Mortgage) and CRFN 2019000021385 (Assignment of Leases and Rents). A related UCC-1 Financing Statement was filed with the New York Department of State on January 14, 2019 (File No. 201901147293).
Outstanding Principal Balance:
Approximately $620,000,000 as of the anticipated Lease commencement date, based on information provided by Landlord's counsel. The loan matures on January 15, 2029, with two one-year extension options available to Landlord/Borrower, subject to satisfaction of certain conditions.
Loan Officer:
Patricia Delgado, Vice President, Commercial Real Estate Lending Division, Atlas Continental Bank, N.A., 277 Park Avenue, 8th Floor, New York, NY 10172, telephone (212) 555-0347.
Analysis:
This is the most significant exception identified in the Commitment and warrants careful attention. The Atlas first mortgage lien was recorded on January 15, 2019, which predates the proposed commencement of the Tenant's leasehold estate. Under established New York law and general principles of title priority, a mortgage recorded prior to the commencement of a leasehold interest takes priority over the leasehold estate unless the parties enter into a subordination, non-disturbance and attornment agreement modifying the priority and providing non-disturbance protections for the tenant.
Without an SNDA, in the event that Atlas were to foreclose on its mortgage (whether by judicial foreclosure or by acceptance of a deed-in-lieu of foreclosure), the Tenant's leasehold interest could be extinguished entirely. The purchaser at a foreclosure sale or the lender accepting a deed-in-lieu would take the Property free and clear of the Tenant's lease, and the Tenant would have no right to remain in possession of the Premises.
This risk is substantial and must be addressed before the Lease is executed. The financial exposure to Aurelius is significant: the Tenant will be investing substantial sums in the build-out of the Premises (estimated fit-out budget of approximately $55 million, based on information provided by Vivienne Caldwell), in addition to aggregate base rent obligations of approximately $90 million over the fifteen-year initial term.
Recommendation:
This exception must be addressed through the delivery of a fully executed SNDA among three parties: (i) Atlas Continental Bank, N.A., as Lender; (ii) Greystone Metropolitan Realty LLC, as Landlord/Borrower; and (iii) Aurelius Media Holdings Inc., as Tenant. The SNDA should provide the following protections:
(a) Non-Disturbance. Atlas must agree that, so long as the Tenant is not in default under the Lease beyond any applicable notice and cure periods, the Tenant's occupancy and all of its rights under the Lease (including renewal options, expansion rights, and rights of first offer) will not be disturbed, terminated, or otherwise adversely affected by any foreclosure of the Atlas mortgage or any action or proceeding instituted under or in connection with the mortgage, or by any deed-in-lieu of foreclosure.
(b) Attornment. The Tenant must agree to attorn to any successor landlord resulting from a foreclosure or deed-in-lieu of foreclosure, recognizing such successor as the landlord under the Lease and continuing to perform its obligations thereunder.
(c) Subordination. The Tenant must agree that the Lease is subordinate to the Atlas mortgage, subject to the non-disturbance protections set forth in the SNDA. This subordination is consistent with standard commercial practice for a lease subordinated to a pre-existing mortgage in exchange for non-disturbance protections.
(d) Additional Protections. The SNDA should also address, among other things: (i) the right of the successor landlord to receive casualty and condemnation insurance proceeds; (ii) limitations on liability of the successor landlord for prior acts or omissions of the original landlord; (iii) the successor landlord's obligation to honor the economic terms of the Lease, including base rent, tenant improvement allowances, and free rent periods; and (iv) notice and cure rights in favor of the Tenant in the event of a default by the Landlord under the mortgage.
The Lease itself requires the delivery of the SNDA as a condition precedent to the Commencement Date (August 1, 2023), and we understand that this requirement has been agreed to in principle by the Landlord.
Atlas Continental Bank's counsel for purposes of the SNDA negotiation is Halsted & Brinkley LLP (Thomas Brinkley, Partner; 200 Park Avenue, Suite 2400, New York, NY 10166; telephone (212) 555-0291). We anticipate commencing SNDA negotiations on or about June 20, 2023, and we recommend targeting execution of the SNDA by early July 2023 to allow adequate time before the Lease Commencement Date.
Upon delivery of the fully executed SNDA, Commonwealth Fidelity should either: (i) remove this exception from Schedule B-II of the title policy entirely; or (ii) modify the exception to note that the first mortgage lien is subject to the terms of the SNDA, thereby preserving the Tenant's non-disturbance protections within the scope of the title insurance coverage. We recommend the latter approach, combined with the SNDA/Non-Disturbance endorsement discussed in Section VII.A below, as it provides the most comprehensive protection.
C. Exception No. 2 — Real Property Tax and Assessment Liens
Description:
Real property taxes, water charges, sewer rents, and assessments that are a lien but not yet due and payable as of the effective date of the Commitment.
Analysis:
This is a standard exception included in virtually all title insurance policies issued in New York. The exception reflects the fact that real property taxes and assessments accrue as liens against the Property in accordance with New York City tax collection schedules, and that amounts not yet due cannot be fully ascertained at the time of policy issuance.
In the leasehold context, this exception is acceptable because the Tenant's obligation with respect to real estate taxes is addressed in the Lease through the tenant's proportionate share of real estate tax escalations above the base year. Specifically, under the Lease, the Tenant will pay its Proportionate Share of increases in real estate taxes over the Base Tax Year (Calendar Year 2023). The Tenant's Proportionate Share is 12.76%, calculated as the ratio of the Premises rentable area to the total Building rentable area (185,000 RSF ÷ 1,450,000 RSF = 12.76%). The Lease allocates responsibility for the underlying tax obligation to the Landlord, with the Tenant bearing only its proportionate share of increases above the base year.
Recommendation:
Accept as a permitted exception. No further action is required with respect to this exception.
D. Exception No. 3 — Zoning and Building Restrictions
Description:
Applicable zoning ordinances, building codes, and other governmental regulations affecting the Property, including but not limited to the New York City Zoning Resolution, the New York City Building Code, and the New York City Administrative Code, including any amendments or modifications thereto.
Analysis:
This is a standard exception included in title insurance policies in New York. The exception reflects the fact that title insurance does not, in the absence of a specific zoning endorsement, insure compliance with zoning laws and building regulations.
We are separately conducting a comprehensive zoning and survey review to confirm that the Building and the Premises comply with the New York City Zoning Resolution and applicable building codes for the Tenant's intended use. The intended use includes general office use, studio and production facilities, and ancillary uses consistent with a global media, entertainment, and e-commerce headquarters. A separate Survey and Zoning Review Memorandum is being prepared by the undersigned and is targeted for completion by June 15, 2023. That memorandum will address, among other things, the applicable zoning district designation, permitted uses, floor area ratio compliance, height and setback requirements, and any applicable special permits or variances.
Recommendation:
Accept as a standard permitted exception. Zoning compliance will be confirmed separately through the Survey and Zoning Review Memorandum. In addition, we recommend requesting a zoning endorsement from Commonwealth Fidelity (see Section VII.C below) to provide affirmative coverage confirming that the current zoning classification permits the intended uses.
E. Exception No. 4 — Easements, Covenants, and Restrictions of Record
Description:
Easements, restrictive covenants, and declarations of record affecting the Property, including but not limited to:
(a) Utility easement in favor of Consolidated Edison Company of New York, Inc. for the installation, maintenance, and operation of electric and gas utility lines and equipment, recorded in the Office of the City Register, New York County, on March 12, 2000 (CRFN 2000000128476);
(b) Declaration of Covenants, Conditions and Restrictions for Greystone Tower, recorded on September 5, 2000 (CRFN 2000000418923), as amended by First Amendment to Declaration recorded on April 18, 2003 (CRFN 2003000216847);
(c) Reciprocal Easement Agreement between Greystone Metropolitan Realty LLC (as successor-in-interest) and the Metropolitan Transportation Authority relating to subway infrastructure access and support, recorded on August 22, 2000 (CRFN 2000000374612); and
(d) Common area and shared facility agreements relating to the Building's lobby, loading dock, and parking garage, as referenced in the Declaration.
Analysis:
We have reviewed the descriptions of each of the recorded instruments identified in this exception, to the extent available from the face of the Commitment. These instruments are typical of those encountered in connection with a Class A Midtown Manhattan office tower and relate to utility infrastructure, common area management, and transportation authority coordination obligations that are common in buildings situated above or adjacent to MTA subway infrastructure.
Based on our preliminary review, none of the instruments identified in this exception appear to materially adversely affect the Tenant's intended use of the Premises for general office, studio/production, and ancillary media/entertainment/e-commerce headquarters purposes. Similarly, none of the identified instruments appear to restrict or impede the Tenant's access to the Premises or the Building's common areas, lobbies, elevators, or other shared facilities.
We have requested copies of the full recorded instruments from Commonwealth Fidelity's title officer and will review them in detail upon receipt. Should any provision of any such instrument be inconsistent with the Tenant's permitted use under the Lease, we will supplement this memorandum with additional analysis and recommendations.
Recommendation:
Accept as permitted exceptions, provided that upon completion of our review of the full recorded instruments, none are found to be inconsistent with the Tenant's permitted use under the Lease or to materially adversely affect the Tenant's occupancy, access, or use of the Premises.
F. Exception No. 5 — Existing Leases and Tenancies
Description:
Rights of existing tenants and occupants in the Building, including but not limited to Kestrel Insurance Holdings Inc. (current tenant on Floors 30, 31, and 32 of the Building) and all other tenants and occupants of the Building as of the effective date of the Commitment.
Analysis:
This exception is standard for a leasehold title insurance policy issued in connection with a multi-tenant office building. The Building has a total rentable area of approximately 1,450,000 RSF across 52 stories and is home to numerous tenants. The exception acknowledges the rights of these existing tenants and occupants, which rights are senior to or concurrent with the Tenant's leasehold estate.
Kestrel Insurance Holdings Inc. is specifically identified because its tenancy on Floors 30 through 32 is in close physical proximity to the Tenant's Premises on Floors 34 through 38. Floor 33 is currently vacant and is subject to the Tenant's right of first offer ("ROFO") under the Lease, along with Floors 30 through 32 (upon expiration or earlier termination of Kestrel's lease). However, it is important to note that Kestrel's existing lease includes rights that are senior to the Tenant's ROFO with respect to Floors 30 through 33. Specifically, Kestrel's lease is understood to include a renewal option and a right of first refusal on the immediately adjacent Floor 33. Accordingly, the Tenant's ROFO on Floors 30 through 33 would be exercisable only to the extent that Kestrel does not exercise its prior rights.
This exception does not affect the Tenant's Premises (Floors 34 through 38), and the existing tenancies in the Building do not restrict or impede the Tenant's access to or use of its Premises.
Recommendation:
Accept as a permitted exception. This exception is inherent in any leasehold transaction in a multi-tenant building and does not present any material adverse issue for the Tenant.
G. Exception No. 6 — Standard Survey Matters
Description:
Encroachments, overlaps, boundary line disputes, or other matters that would be disclosed by an accurate survey and inspection of the Property.
Analysis:
This is the standard survey exception included in ALTA owner's title insurance policies. In its current form, this exception effectively excludes from coverage any matters relating to the physical boundaries and improvements on the Property that would be revealed by a survey. For a transaction of this magnitude, it is important to obtain deletion of this exception and replace it with coverage based on the actual survey results.
Recommendation:
Request deletion of this exception upon delivery and review of a current ALTA/NSPS Land Title Survey of the Property. Upon review and approval of the survey, Commonwealth Fidelity should issue a survey endorsement (see Section VII.B below) that replaces the general survey exception with specific survey-related exceptions, if any, based on the matters actually disclosed by the survey. This is standard practice for Class A commercial transactions in Manhattan.
H. Additional Exceptions
Based on our review of the Commitment as issued on June 9, 2023, no additional specific exceptions beyond those described above (Exceptions Nos. 1 through 6) are set forth in Schedule B-II. However, we note that the gap search to be conducted by Commonwealth Fidelity prior to policy issuance (covering the period from June 9, 2023 through the lease execution date) may disclose additional matters. Should any additional exceptions be identified as a result of the gap search or otherwise, we will promptly review and analyze such exceptions and supplement this memorandum with our recommendations.
In addition, we will confirm with Commonwealth Fidelity's title officer whether there are any pending assessments, special district charges, or other municipal encumbrances affecting the Property that may not appear in the Commitment as currently issued.
VI. OWNERSHIP STRUCTURE AND AUTHORITY
A. Landlord's Chain of Title
Based on the information reflected in the Commitment and supplemented by information provided by Landlord's counsel, the ownership structure of the fee owner is as follows:
Greystone Metropolitan Realty LLC is the direct fee owner of record of the Property. Greystone Metropolitan Realty LLC is a Delaware limited liability company that serves as the operating entity holding the Property on behalf of Greystone Capital Partners Fund VI LP (the "Fund"), a closed-end institutional real estate fund managed by Greystone Capital Advisors LLC, a registered investment adviser. The general partner of the Fund is Greystone Capital GP VI LLC, a Delaware limited liability company.
The key principals of the Greystone organization relevant to this transaction are:
The title commitment reflects a satisfactory vesting of fee simple title in Greystone Metropolitan Realty LLC. We have confirmed, through a review of publicly available records in the Office of the City Register, New York County, that Greystone acquired the Property on November 30, 2018, by deed recorded as CRFN 2018000497628, and that no subsequent conveyances of any interest in the Property have been recorded.
Analysis:
Given the layered ownership structure — with Greystone Metropolitan Realty LLC as the property-level holding entity, Fund VI LP as the beneficial owner, and Greystone Capital GP VI LLC as the general partner of the Fund — it is important to confirm that Greystone Metropolitan Realty LLC's operating agreement or equivalent organizational documents authorize the execution of a commercial lease of this magnitude (a 15-year, 185,000 RSF lease with aggregate base rent obligations of approximately $90 million) without the need for additional consents or approvals from the Fund, the general partner, or the fund manager.
In particular, we recommend confirming:
(a) that the operating agreement of Greystone Metropolitan Realty LLC grants the manager or managing member authority to execute leases of this duration and financial magnitude;
(b) that no provisions of the Fund's limited partnership agreement or the general partner's operating agreement require investor, advisory committee, or limited partner consent for the execution of major leases;
(c) that the specific individual(s) who will execute the Lease on behalf of Greystone have been duly authorized by appropriate resolutions or written consents; and
(d) that no "key person" provisions or change-of-control restrictions in the Fund documents would be triggered by or affect the validity of the Lease.
B. Landlord's Authority
We recommend requesting from Landlord's counsel, Pemberton Locke & Strauss LLP (lead partner: Diane Ashford; associate: Kevin Mulcahy; 1301 Avenue of the Americas, 40th Floor, New York, NY 10019), the following documentation:
(a) A copy of the operating agreement of Greystone Metropolitan Realty LLC (or relevant excerpts thereof), together with any amendments, to the extent such document addresses authorization of major transactions, including long-term leases;
(b) A certificate of authority executed by an authorized representative of Greystone Metropolitan Realty LLC (and, if necessary, Greystone Capital GP VI LLC) confirming that the person(s) executing the Lease have been duly authorized to do so and that no further consents or approvals are required;
(c) Certificates of good standing for Greystone Metropolitan Realty LLC from the Delaware Secretary of State and the New York Department of State; and
(d) Evidence of authority of any individuals signing on behalf of Greystone, such as incumbency certificates or certified copies of resolutions.
We will coordinate with Diane Ashford's office to obtain these materials and will review them upon receipt to confirm that the authority is adequate. Upon satisfactory review, we will advise Commonwealth Fidelity that the authority requirement has been met.
VII. RECOMMENDED ENDORSEMENTS
In order to enhance the coverage provided by the leasehold title insurance policy and to address certain of the exceptions and requirements identified in the Commitment, we recommend requesting the following endorsements from Commonwealth Fidelity. Each endorsement is discussed below, together with a brief description of the coverage it provides and its relevance to the transaction.
A. SNDA / Non-Disturbance Endorsement
We recommend requesting an endorsement affirmatively insuring the non-disturbance protections provided by the SNDA to be executed by Atlas Continental Bank, N.A. This endorsement is critical to the Tenant's protection and should confirm that the leasehold estate insured under the policy will not be extinguished, terminated, or otherwise adversely affected by any foreclosure or other enforcement action under the Atlas mortgage, so long as the Tenant is not in default under the Lease beyond any applicable notice and cure periods. This endorsement should be tied to the modification or qualification of Exception No. 1, as discussed in Section V.B above.
B. Survey / Location Endorsement
We recommend requesting the deletion of the standard survey exception (Exception No. 6) and the issuance of a survey endorsement based on the ALTA/NSPS Land Title Survey of the Property. Upon delivery and review of a current, certified survey, Commonwealth Fidelity should issue an endorsement that replaces the blanket survey exception with specific exceptions, if any, based on the survey findings. This endorsement provides affirmative coverage against losses arising from matters that would be disclosed by the survey but that are not specifically excepted.
C. Zoning Endorsement (ALTA 3.1 or Equivalent)
We recommend requesting a zoning endorsement, in the form of ALTA Endorsement 3.1 or the equivalent New York form, confirming that the current zoning classification of the Property permits the Tenant's intended use of the Premises for general office, studio and production, and ancillary media, entertainment, and e-commerce headquarters purposes. This endorsement will provide additional comfort regarding zoning compliance, supplementing the separate Survey and Zoning Review Memorandum being prepared. The endorsement should identify the applicable zoning district, the permitted uses thereunder, and any applicable conditions or restrictions.
D. Access Endorsement
We recommend requesting an access endorsement confirming that the Premises, and the Building in which the Premises are located, have legal and physical access to public streets and sidewalks, including Seventh Avenue to the west and West 51st Street and West 52nd Street to the south and north, respectively. This endorsement provides affirmative coverage that the Premises are not landlocked and that the Tenant will have unimpeded access to and from the Building through public rights-of-way.
E. Contiguity / Same-as-Survey Endorsement
We recommend requesting a contiguity endorsement confirming that the Premises floors (Floors 34 through 38) are contiguous within the Building and that the legal description and physical location of the Premises as insured under the policy match the survey depiction. For a multi-floor leasehold interest, this endorsement confirms that there are no gaps or intervening areas between the insured floors that fall outside the scope of coverage.
F. Tax Parcel Endorsement
We recommend requesting a tax parcel endorsement confirming that the Property is identified as a single tax parcel on the records of the New York City Department of Finance, bearing the designation Block 1024, Lot 18, Borough of Manhattan. This endorsement confirms that the Property is not part of a larger tax parcel that includes other properties and that the tax obligations and liens relating to the Property are specific to this parcel.
G. Leasehold Owner's Endorsement
We recommend requesting the standard ALTA leasehold owner's endorsement, which modifies the standard owner's policy form to cover the leasehold estate. This endorsement should identify the following key terms of the leasehold:
(a) Lease Term: Fifteen (15) years, commencing August 1, 2023, and expiring July 31, 2038.
(b) Rent Commencement: February 1, 2024 (a six-month free rent period).
(c) Renewal Options: Two (2) successive five (5) year renewal options, the first expiring July 31, 2043, and the second expiring July 31, 2048.
(d) Premises: Floors 34, 35, 36, 37, and 38 at 787 Seventh Avenue, New York, NY 10019, comprising approximately 185,000 RSF.
(e) Landlord: Greystone Metropolitan Realty LLC.
(f) Tenant: Aurelius Media Holdings Inc.
The endorsement should also specify the valuation methodology used for the leasehold estate and the basis for determining covered losses.
H. Comprehensive / Extended Coverage Endorsement
We recommend requesting an extended coverage endorsement, to the extent available for New York leasehold owner's policies. This endorsement would expand the coverage of the policy beyond the standard ALTA 2006 form to include additional protections against risks such as post-policy forgery, encroachment by improvements on adjoining land, and certain other matters not covered under the standard policy form. The availability and scope of this endorsement will depend on Commonwealth Fidelity's underwriting guidelines for leasehold policies in New York, and we will coordinate with the title officer to determine what extended coverage is available.
A summary of the recommended endorsements, together with estimated costs and availability, is set forth in the Endorsement Request Summary Table attached as Appendix C.
VIII. PERMITTED EXCEPTIONS SUMMARY
Based on our review of the Commitment and the analysis set forth above, we recommend that the following exceptions be treated as acceptable "permitted exceptions" under the Agreement of Lease, to be referenced in the Lease (as part of the Landlord's title representations or as an exhibit) and in the leasehold title insurance policy:
1. Atlas Continental Bank, N.A. First Mortgage Lien — Acceptable as a permitted exception only upon delivery of a fully executed SNDA providing non-disturbance protections in favor of the Tenant, in form and substance satisfactory to the Tenant and to Commonwealth Fidelity. Without the SNDA, this exception is not acceptable.
2. Real Property Tax and Assessment Liens — Real property taxes, water charges, sewer rents, and assessments that are a lien but not yet due and payable. Acceptable as a standard permitted exception; Tenant's obligations with respect to tax escalations are addressed in the Lease.
3. Applicable Zoning and Building Restrictions — Zoning ordinances, building codes, and other governmental regulations affecting the Property. Acceptable as a standard permitted exception, subject to confirmation of zoning compliance through the separate Survey and Zoning Review Memorandum and the procurement of a zoning endorsement.
4. Recorded Easements, Covenants, and Restrictions — Easements, restrictive covenants, and declarations of record, as specifically identified in the Commitment (including the Consolidated Edison utility easement, the Declaration of Covenants, Conditions and Restrictions, the MTA reciprocal easement agreement, and common area and shared facility agreements). Acceptable as permitted exceptions, as none have been found to be materially adverse to the Tenant's intended use, occupancy, or access.