ATTORNEY WORK PRODUCT — PRIVILEGED & CONFIDENTIAL
MEMORANDUM
TO: Angela Fontaine, Partner, Real Estate, Calderwood & Harkness LLP
FROM: Cynthia Ho, Associate, Real Estate, Calderwood & Harkness LLP
DATE: March 20, 2026
RE: Existing Financing Review and CEMA Feasibility Analysis — 450 West 34th Street, New York, NY 10001 (Block 754, Lot 42, Borough of Manhattan)
MATTER NO.: 1026-00003
CLIENT: Briarwood Family Office LLC
I. Executive Summary
This memorandum reviews the existing mortgage financing encumbering the commercial property located at 450 West 34th Street, New York, NY 10001 (the "Property"), currently held by Eastbridge Commercial Bank, N.A. (the "Existing Lender"), and analyzes the feasibility and economic benefits of structuring a Consolidation, Extension, and Modification Agreement ("CEMA") in connection with the proposed $78,000,000 senior acquisition mortgage from Pinnacle Federal Savings Bank (the "Proposed Lender"). This analysis has been prepared at the request of our client, Briarwood Family Office LLC ("Briarwood" or the "Client"), in connection with its proposed acquisition of the Property.
The Property is to be acquired by BFO 450 West 34th LLC, a Delaware limited liability company to be formed as a single-purpose entity wholly owned by Briarwood Family Office LLC (the "Buyer"), from Meridian Gateway Holdings LLC, a New York limited liability company (the "Seller"), for a purchase price of $120,000,000, with a target closing date of June 30, 2026. The parties are currently finalizing a letter of intent, and the draft Purchase and Sale Agreement is expected to be circulated by early April 2026.
The central question addressed in this memorandum is whether a CEMA structure can be utilized at closing to reduce the mortgage recording tax ("MRT") burden on the Buyer. Based on our analysis, if a CEMA can be executed, the MRT would apply only to the "new money" portion of the Pinnacle mortgage — that is, the difference between the proposed $78,000,000 loan amount and the approximately $28,700,000 outstanding balance of the Eastbridge mortgage — resulting in estimated MRT savings of approximately $803,600 to the Buyer. These savings are substantial and strongly favor pursuing the CEMA structure.
The key risk associated with this strategy is that a CEMA requires the affirmative cooperation of Eastbridge Commercial Bank, N.A. (the Existing Lender), which must agree to assign, rather than satisfy, its existing mortgage at closing. In addition, Pinnacle Federal Savings Bank (the Proposed Lender) must be willing to participate in the CEMA structure and accept an assigned mortgage as part of its consolidated first-priority lien. Both parties must be engaged early in the process to preserve the feasibility of this approach and to avoid timeline delays that could jeopardize the target closing date.
This memorandum is organized as follows: Section II reviews the existing financing in detail; Section III summarizes the proposed acquisition financing from Pinnacle; Section IV calculates the standard MRT absent a CEMA; Section V analyzes the CEMA structure, its mechanics, and the resulting tax savings; Section VI identifies the requirements and conditions for CEMA execution; Section VII discusses recommended PSA provisions; Section VIII addresses additional considerations including costs, timeline, capital stack impact, and tax matters; and Section IX sets forth our recommendations and proposed next steps.
II. Background — The Existing Financing
A. Existing Mortgage — Key Terms
The Property is currently encumbered by a first-priority mortgage lien in favor of Eastbridge Commercial Bank, N.A., a federally chartered national bank. The key terms of the existing mortgage, as reflected in the recorded mortgage instrument and preliminary information obtained from Seller's counsel, are as follows:
Mortgagee: Eastbridge Commercial Bank, N.A. (a federally chartered national bank supervised by the Office of the Comptroller of the Currency)
Mortgagor: Meridian Gateway Holdings LLC (EIN: 27-6831044), a New York limited liability company organized under the laws of the State of New York
Property Address: 450 West 34th Street, New York, NY 10001 (Block 754, Lot 42, Borough of Manhattan)
Original Principal Amount: $41,100,000
Recording Date: April 14, 2011 (recorded with the New York City Register via the Automated City Register Information System ("ACRIS"))
Recording Information: The mortgage was recorded in connection with Meridian Gateway Holdings LLC's original acquisition of the Property from its predecessor owner on April 14, 2011, at an acquisition price of $68,500,000. The original loan-to-value ratio at origination was approximately 60% ($41,100,000 ÷ $68,500,000 = 60.0%).
Current Estimated Payoff Balance: Approximately $28,700,000, based on preliminary information obtained from Seller's counsel, Hargrove, Pettigrew & Sloane LLP (Rebecca Tran, Esq.). This figure is an approximation and is subject to confirmation through a formal payoff letter to be requested from Eastbridge during the due diligence period. The payoff amount will be subject to per diem interest accrual and any applicable prepayment charges, fees, or adjustments through the actual closing date.
Principal Reduction Since Origination: The difference between the original principal amount and the current estimated payoff balance reflects approximately $12,400,000 in principal amortization over the approximately fifteen years since origination ($41,100,000 − $28,700,000 = $12,400,000). This level of amortization is consistent with a standard amortizing commercial mortgage over a fifteen-year period, though we have not yet confirmed the specific amortization schedule, interest rate, or whether any voluntary prepayments were made during the loan term.
We note that the Eastbridge mortgage has been outstanding for approximately fifteen years. While we have not yet reviewed the underlying loan agreement, it is likely that the original loan term has either been extended or that the current balance reflects a fully amortizing or partially amortizing structure. We will need to review the loan documents to confirm whether any prepayment penalty or yield maintenance provision would apply in the context of a CEMA assignment, as opposed to a traditional payoff and satisfaction.
B. Related UCC Filing
In connection with the Eastbridge mortgage, a UCC-1 Financing Statement was filed in favor of Eastbridge Commercial Bank, N.A. as secured party, covering fixtures and personal property located at the Property. The UCC-1 filing is standard for commercial mortgage transactions in New York and creates a perfected security interest in personal property and fixtures that supplement the real property mortgage lien.
The UCC-1 financing statement will need to be addressed as part of the closing or CEMA process. Specifically, if a CEMA is executed, the UCC-1 may be assigned by Eastbridge to Pinnacle Federal Savings Bank as part of the assignment of the mortgage and related loan documents. Alternatively, the existing UCC-1 may be terminated by Eastbridge and a new UCC-1 filed by Pinnacle in connection with its new loan. The preferred approach will depend on the requirements of Pinnacle's counsel and the title company, and should be coordinated during the document preparation phase. In either case, it is critical that there be no gap in perfection of the security interest in personal property and fixtures.
We have confirmed through an ACRIS search that the UCC-1 filing remains of record. Continuation statements, if any, should be verified to ensure that the filing remains effective as of the closing date. Under UCC Article 9, a financing statement is effective for five years from the date of filing and must be continued by the filing of a continuation statement within six months prior to lapse. Given the original filing date of approximately April 2011, we anticipate that at least two continuation statements should have been filed. This will be confirmed as part of our UCC search and due diligence review.
C. Existing Title Policy Reference
Granite State Title Insurance Company issued the existing owner's title insurance policy in connection with Meridian Gateway Holdings LLC's acquisition of the Property in 2011. The relevant details are as follows:
• Title Insurer: Granite State Title Insurance Company
• Policy Number: GST-2011-04872
• Policy Date: April 14, 2011
• Insured Amount: $68,500,000 (reflecting the acquisition price)
• Insured Party: Meridian Gateway Holdings LLC (as owner)
The existing owner's policy reflects the Eastbridge mortgage as a permitted exception on Schedule B-II, or, in the case of the lender's title policy issued contemporaneously, as a lien to be insured over or scheduled as the insured mortgage. The Eastbridge mortgage is expected to be the only mortgage lien against the Property as of the date of the existing policy.
In connection with the proposed acquisition, an updated title commitment has been ordered from Granite State Title Insurance Company. The assigned title officer is Martin Clearfield, who has handled several prior transactions for Calderwood & Harkness clients and is familiar with CEMA procedures in the New York City market. The updated title commitment will show the Eastbridge mortgage as a Schedule B-I requirement — that is, a requirement to be either satisfied (in a standard closing) or assigned (in a CEMA closing) at or prior to closing in order for Granite State to issue the new owner's and lender's title policies.
We anticipate that the updated title commitment will also reflect the following as Schedule B-II exceptions: the Ashford Partners LLC easement (Liber 4823, Page 112), standard survey exceptions (to be addressed through the delivery of an updated ALTA/NSPS survey), real estate tax and water/sewer liens (if any), and such other matters as may appear in the title search. These exceptions will be reviewed in detail in the Title Review Memorandum being prepared separately.
D. Payoff Obligations at Closing
In a standard closing — that is, absent a CEMA — the existing Eastbridge mortgage would be satisfied in full at closing from the Seller's proceeds. The closing mechanics in a non-CEMA scenario would be as follows:
(i) Eastbridge would deliver a payoff letter specifying the exact amount required to satisfy the mortgage in full, including outstanding principal, accrued interest through the closing date, and any applicable fees, prepayment premiums, or other charges.
(ii) At closing, the payoff amount (estimated at approximately $28,700,000) would be wire-transferred to Eastbridge from the Seller's closing proceeds held by the title company or escrow agent.
(iii) Upon receipt of the payoff funds, Eastbridge would execute and deliver a satisfaction of mortgage (or certificate of discharge) for recording with the New York City Register. The satisfaction would discharge the mortgage lien of record.
(iv) The related UCC-1 financing statement would be terminated by the filing of a UCC-3 Termination Statement by Eastbridge.
A formal payoff letter from Eastbridge will be requested as part of due diligence. We recommend that this request be submitted no later than thirty (30) days prior to the target closing date of June 30, 2026 — that is, no later than May 31, 2026. Payoff letters issued by institutional lenders are typically valid for thirty (30) days from the date of issuance and are subject to per diem interest adjustments. If the closing is delayed beyond the payoff letter's expiration date, a refreshed payoff letter will need to be obtained.
It is important to note that the payoff obligations described in this subsection represent the baseline scenario. If a CEMA is pursued, the Eastbridge mortgage would not be satisfied at closing but would instead be assigned, as described in Section V below.
III. Proposed Acquisition Financing — Pinnacle Federal Savings Bank
A. Proposed Loan Terms
The proposed acquisition financing for the Property is being arranged through Pinnacle Federal Savings Bank. Preliminary discussions have been conducted between Briarwood's principals and the Pinnacle relationship team. The key indicative terms of the proposed loan, based on verbal discussions and preliminary underwriting parameters communicated by the lender, are as follows:
Lender: Pinnacle Federal Savings Bank (a federally chartered savings bank supervised by the Office of the Comptroller of the Currency)
Relationship Manager: Daniel Ortega, Senior Vice President, Commercial Real Estate Lending; 245 Park Avenue, 12th Floor, New York, NY 10167
Proposed Loan Amount: $78,000,000, representing a 65% loan-to-value ratio based on the $120,000,000 purchase price ($120,000,000 × 0.65 = $78,000,000). We note that the LTV ratio is based on the contractual purchase price rather than an independent appraisal. Pinnacle will likely require an independent MAI appraisal confirming a value of at least $120,000,000 as a condition to closing.
Indicative Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 225 basis points. Based on the current SOFR rate of approximately 4.35% as of the date of this memorandum, the estimated all-in interest rate is approximately 6.60%. This rate is subject to change based on market conditions at the time of rate lock and the final terms of the term sheet, if and when issued.
Term: Five (5) years from the closing date, with an anticipated maturity date of approximately June 30, 2031 (assuming a closing on June 30, 2026).
Amortization: Thirty (30)-year amortization schedule, resulting in monthly payments of principal and interest based on a 360-month amortization period. The loan will not be fully amortizing over the five-year term; a balloon payment of the remaining principal balance will be due at maturity.
Estimated Annual Debt Service (Principal and Interest): Based on the proposed loan amount of $78,000,000, an interest rate of 6.60%, and a 30-year amortization schedule, the estimated annual debt service is approximately $5,986,800 per year, or approximately $498,900 per month. These figures are estimates and will be refined upon issuance of a formal term sheet and rate lock.
Estimated Debt Service Coverage Ratio ("DSCR"): Based on the annualized in-place net operating income ("NOI") of the Property of approximately $6,960,000, the estimated DSCR is approximately 1.16× ($6,960,000 ÷ $5,986,800 = 1.16×). We note that this DSCR is below the typical institutional lender threshold of 1.25×, which may present an underwriting challenge. The financing strategy to address this shortfall — including potential interest-only period negotiations, earn-out provisions, or lease-up reserves — is discussed in a separate Financing Strategy Memorandum being prepared concurrently by this office.
Status: A formal term sheet from Pinnacle has not yet been issued. Preliminary discussions between Douglas Fairchild (on behalf of Briarwood) and Daniel Ortega at Pinnacle are ongoing. We anticipate that a term sheet will be circulated within the next two to three weeks, subject to Pinnacle's internal credit review and committee approval. The CEMA structure should be raised with Pinnacle at the earliest opportunity to confirm the lender's willingness to participate.
B. Borrower Entity
Proposed Borrower: BFO 450 West 34th LLC, a Delaware limited liability company to be formed as a single-purpose entity ("SPE") for the purpose of acquiring and holding title to the Property and serving as the borrower under the Pinnacle mortgage.
Sole Member: Briarwood Family Office LLC (EIN: 83-2947156), a Delaware limited liability company, will be the sole member of the Borrower entity.
SPE Provisions: Pinnacle Federal Savings Bank will require, as is standard in institutional commercial real estate lending, that the Borrower entity comply with single-purpose entity covenants and separateness provisions. These provisions are designed to insulate the Borrower from the liabilities of its affiliates and to minimize the risk of substantive consolidation in the event of a bankruptcy of any related entity. Specific SPE requirements will likely include:
(a) The Borrower shall not engage in any business or activity other than the ownership, operation, and financing of the Property;
(b) The Borrower shall maintain separate books, records, and bank accounts from its members and affiliates;
(c) The Borrower shall hold itself out as a separate entity and not commingle its assets with those of any other person or entity;
(d) The Borrower shall maintain adequate capital and shall not incur indebtedness other than the Pinnacle mortgage and customary trade payables; and
(e) Pinnacle will likely require a springing member or independent director provision in the Borrower's LLC agreement, providing that an independent director must consent to any voluntary bankruptcy filing by the Borrower. The form of independent director provision will be negotiated as part of the loan document review.
The formation of BFO 450 West 34th LLC and the preparation of its operating agreement and related organizational documents are being coordinated by this office. The operating agreement will be drafted to incorporate the SPE provisions required by Pinnacle, subject to review and approval by Pinnacle's counsel.
IV. Mortgage Recording Tax — Standard Calculation (Without CEMA)
A. Applicable MRT Rate
New York City imposes a mortgage recording tax on new mortgage debt recorded in the five boroughs of New York City (Manhattan, Brooklyn, Queens, the Bronx, and Staten Island). The MRT is imposed pursuant to New York Tax Law Article 11 and the New York City Administrative Code, and is payable at the time of recording of the mortgage with the New York City Register.
For mortgages securing principal indebtedness in excess of $500,000 — which is the case here — the combined New York City and New York State MRT rate is 2.80% of the principal debt or obligation secured by the mortgage. This combined rate is comprised of the following components:
(a) New York City basic MRT: 1.75% of the mortgage amount (N.Y.C. Admin. Code § 11-2601);
(b) New York State basic MRT: 0.25% of the mortgage amount (N.Y. Tax Law § 253(1));
(c) New York State additional MRT: 0.25% of the mortgage amount (N.Y. Tax Law § 253(1-a)); and
(d) New York City additional MRT (so-called "mansion tax" surcharge for commercial mortgages): 0.55% of the mortgage amount (applicable to commercial mortgages on property within New York City).
The combined rate of these four components is 1.75% + 0.25% + 0.25% + 0.55% = 2.80%.
The MRT is generally the obligation of the borrower (in this case, the Buyer) and is payable at the time of recording. The MRT is a significant closing cost in New York City commercial real estate transactions, and the CEMA structure described in Section V below is the primary mechanism by which parties seek to reduce this tax burden.
B. Full MRT Calculation — No CEMA
If the full $78,000,000 Pinnacle mortgage were recorded as a new mortgage without the benefit of a CEMA — that is, if the existing Eastbridge mortgage were simply satisfied at closing and a new first-priority mortgage were recorded — the MRT would be calculated as follows:
MRT = $78,000,000 × 2.80% = $2,184,000
This amount — $2,184,000 — would be payable by BFO 450 West 34th LLC at closing as part of the mortgage recording process. The MRT would be remitted to the New York City Register at the time of recording of the mortgage instrument, together with the applicable recording fees.
This is a substantial closing cost and represents one of the largest single line items in the Buyer's closing budget. As discussed in the following section, the CEMA structure offers the opportunity to significantly reduce this cost.
V. CEMA Structure — Overview and Feasibility
A. What Is a CEMA?
A Consolidation, Extension, and Modification Agreement ("CEMA") is a mechanism permitted under New York Real Property Law § 255 and related provisions of the New York Tax Law that allows a purchaser's new lender to effectively "step into the shoes" of the seller's existing lender by taking an assignment of the existing mortgage, rather than requiring the existing mortgage to be satisfied and recording an entirely new mortgage from scratch.
The legal basis for the CEMA is found in New York Tax Law § 255, which provides that where a new mortgage is given to a lender that has received an assignment of an existing mortgage, and the new mortgage and the assigned mortgage are consolidated into a single lien, the MRT is payable only on the amount by which the new consolidated mortgage exceeds the unpaid principal balance of the assigned mortgage. In other words, the MRT is payable only on the "new money" — the incremental amount of new indebtedness above and beyond the existing mortgage balance.
The statutory framework reflects a policy judgment by the New York Legislature that, where a mortgage lien is being continued (albeit in modified form and with a new lender), the taxable event is the creation of new indebtedness, not the continuation of existing indebtedness on which MRT has already been paid. The CEMA structure achieves this result by preserving the existing mortgage lien of record through assignment and consolidation, rather than discharging it and recording a new lien.
In a typical CEMA transaction, the following occurs:
(i) The existing mortgage is assigned (not satisfied) by the existing lender to the new lender (or, in some structures, to the borrower/purchaser as an intermediate step, and then from the borrower/purchaser to the new lender);
(ii) The assigned mortgage remains of record and is not discharged;
(iii) The new lender records a supplemental or "gap" mortgage for the amount of the new indebtedness that exceeds the existing mortgage balance;
(iv) A CEMA instrument is recorded, consolidating the assigned existing mortgage and the new gap mortgage into a single consolidated lien with modified terms reflecting the new lender's loan documents (including the new interest rate, maturity date, and other terms); and
(v) MRT is payable only on the gap mortgage — the "new money" — and not on the portion of the consolidated lien attributable to the assigned existing mortgage.
The CEMA is a well-established and widely used tool in New York City commercial and residential real estate transactions. Institutional lenders, title companies, and real estate attorneys in the New York market are generally familiar with the CEMA process, although the level of cooperation from existing lenders can vary.
B. Mechanics of a CEMA in This Transaction
Applying the CEMA framework to the proposed acquisition and financing of the Property, the mechanics would be as follows:
1. Assignment of Existing Mortgage. At closing, Eastbridge Commercial Bank, N.A. would assign the existing mortgage — with an approximate outstanding principal balance of $28,700,000 — to Pinnacle Federal Savings Bank. The assignment would be effected through the execution and recording of an Assignment of Mortgage instrument, pursuant to which Eastbridge would transfer all of its right, title, and interest in and to the mortgage, the underlying note, and the related loan documents to Pinnacle. In some CEMA transactions, the assignment flows from the existing lender to the borrower/purchaser (here, BFO 450 West 34th LLC) as an intermediate step, and then from the borrower/purchaser to the new lender. The structural preference — direct assignment versus intermediate assignment — will depend on the requirements of Pinnacle's counsel and the title company. Both structures achieve the same economic and tax result.
2. Preservation of Existing Lien. The existing Eastbridge mortgage would not be satisfied or discharged at closing. Instead, the mortgage lien would remain of record, and the assignment would transfer the lien from Eastbridge to Pinnacle (or through the borrower as intermediary). This is the key structural distinction from a standard closing, in which the existing mortgage would be satisfied and a new mortgage recorded.
3. Recording of Supplemental/Gap Mortgage. Pinnacle Federal Savings Bank would record a supplemental mortgage (commonly referred to as a "gap mortgage" or "new money mortgage") for the "new money" amount — that is, the amount by which the total new loan ($78,000,000) exceeds the outstanding balance of the existing assigned mortgage ($28,700,000). The gap mortgage amount would therefore be $49,300,000 ($78,000,000 − $28,700,000 = $49,300,000). The gap mortgage would be a second lien on the Property, subordinate to the assigned existing mortgage, until consolidation is completed.
4. Recording of CEMA Instrument. A Consolidation, Extension, and Modification Agreement would be recorded, consolidating the assigned existing mortgage (approximately $28,700,000) and the new gap mortgage ($49,300,000) into a single consolidated first-priority mortgage lien in the total amount of $78,000,000. The CEMA instrument would modify the terms of the consolidated lien to reflect Pinnacle's loan documents, including the new interest rate, maturity date, amortization schedule, and all other terms and conditions of the Pinnacle loan.
5. MRT Payable on Gap Mortgage Only. Mortgage recording tax would be payable only on the gap/supplemental mortgage of $49,300,000 — the "new money" portion — rather than on the full $78,000,000 consolidated mortgage amount. The MRT on the assigned portion ($28,700,000) is not payable because MRT was already paid when the Eastbridge mortgage was originally recorded in 2011.
C. CEMA MRT Calculation
The MRT calculation under the CEMA structure is as follows:
MRT on new money only: $49,300,000 × 2.80% = $1,380,400
Compared to the full MRT that would be payable without a CEMA:
Full MRT (no CEMA): $78,000,000 × 2.80% = $2,184,000
The estimated CEMA MRT savings are:
$2,184,000 − $1,380,400 = $803,600
The CEMA structure would result in estimated savings of approximately $803,600 in mortgage recording tax for BFO 450 West 34th LLC.
D. Summary Comparison Table
The following table summarizes the MRT calculations with and without a CEMA:
As reflected in the table, the CEMA structure reduces the MRT obligation by approximately 36.8% — from $2,184,000 to $1,380,400. The $803,600 in savings represents a highly significant reduction in the Buyer's closing costs and strongly supports pursuing the CEMA structure.
VI. Requirements and Conditions for CEMA Execution
The successful execution of a CEMA in this transaction is contingent upon the satisfaction of several requirements and the cooperation of multiple parties. Each of these requirements is discussed below.
A. Eastbridge Commercial Bank, N.A. Cooperation
The CEMA cannot proceed without the affirmative cooperation of Eastbridge Commercial Bank, N.A., the existing mortgagee. Eastbridge's participation is the single most critical factor in the CEMA analysis, as the existing lender holds the mortgage that must be assigned rather than satisfied. Specifically, Eastbridge must agree to the following:
1. Assign (rather than satisfy) its existing mortgage to the new lender (Pinnacle Federal Savings Bank) or to the purchaser/borrower (BFO 450 West 34th LLC), as applicable. This requires a departure from Eastbridge's standard payoff and satisfaction process.
2. Execute an assignment of mortgage instrument in recordable form, transferring all of Eastbridge's right, title, and interest in the mortgage, the underlying note, and the related loan documents to the assignee.
3. Deliver a payoff/assignment letter confirming the outstanding principal balance of the mortgage as of the closing date, together with any per diem interest adjustments, prepayment charges (if applicable), and other amounts due. The payoff/assignment letter will serve as the basis for the CEMA calculations and the wire transfer of funds at closing.
4. Assign the related UCC-1 financing statement covering fixtures and personal property at the Property, or consent to its termination and replacement with a new UCC-1 filing in favor of Pinnacle. The preferred approach will depend on whether the existing UCC-1 can be validly assigned or whether a new filing is required to ensure perfection of Pinnacle's security interest.
5. Execute a title affidavit or indemnity, if required by Granite State Title Insurance Company, confirming the validity and enforceability of the existing mortgage, the outstanding balance, and the absence of any defenses, offsets, or claims that would impair the lien.
It is important to emphasize that Eastbridge is under no legal obligation to cooperate in a CEMA. There is no statutory requirement that an existing lender participate in a CEMA transaction; the lender's participation is entirely voluntary. If Eastbridge declines to assign its mortgage, the Buyer would have no recourse against Eastbridge and would be required to close with a standard payoff and new mortgage recording, paying the full MRT of $2,184,000.
That said, many institutional lenders in the New York market routinely cooperate in CEMA transactions, particularly for commercial loans. CEMAs are a well-established practice in New York City, and institutional lenders generally understand the significant tax savings that a CEMA provides to borrowers and purchasers. However, existing lenders often charge an administrative or processing fee for their cooperation, typically ranging from $2,500 to $10,000, although some lenders — particularly those that must coordinate with loan servicers or secondary market participants — may charge higher fees. The fee, if any, charged by Eastbridge must be negotiated and confirmed.
We recommend sending a formal CEMA cooperation request letter to Eastbridge as soon as practicable after execution of the Purchase and Sale Agreement, or, if possible, during the letter of intent period, in order to gauge Eastbridge's willingness to cooperate at an early stage. A draft of this letter is currently being prepared by this office (see Draft CEMA Request Letter to Eastbridge Commercial Bank, N.A., to be circulated under separate cover).
With respect to timing, Eastbridge will need sufficient lead time — typically thirty (30) to forty-five (45) days — to process the CEMA assignment internally. This lead time accounts for internal approvals, loan payoff and assignment balance calculations, document preparation, and coordination with any loan servicer or sub-servicer. Given the target closing date of June 30, 2026, the CEMA cooperation request should be submitted to Eastbridge no later than mid-May 2026 to ensure adequate processing time. If possible, earlier engagement is preferred to provide additional cushion in the event of delays.
B. Pinnacle Federal Savings Bank Willingness
The proposed new lender, Pinnacle Federal Savings Bank, must also agree to participate in the CEMA structure. While the CEMA primarily benefits the borrower (through MRT savings), the new lender must be willing to accept the CEMA closing mechanics, which differ from a standard new mortgage closing. Specifically, Pinnacle must agree to the following:
1. Acceptance of an assignment of the existing Eastbridge mortgage as part of its consolidated first-priority lien, rather than requiring a wholly new mortgage lien. Pinnacle must be comfortable that the assigned mortgage, when consolidated with the gap mortgage through the CEMA instrument, will constitute a valid, enforceable, first-priority lien on the Property in the full amount of $78,000,000.
2. Title insurance endorsement confirming that the consolidated CEMA lien has the priority, validity, and amount of the full $78,000,000 mortgage. Pinnacle's counsel will require a lender's title insurance policy from Granite State Title Insurance Company specifically addressing the CEMA lien structure, including appropriate endorsements.
3. Modified loan document formats to accommodate the CEMA structure. In a CEMA closing, the standard loan document package is supplemented with additional instruments, including a supplemental or gap note, a gap mortgage, the CEMA agreement itself, and the assignment of mortgage instruments. Pinnacle's counsel must be willing to prepare or review these additional documents, and the loan documents must be structured to reflect the CEMA consolidation.
Many institutional lenders operating in the New York City market are familiar with and routinely participate in CEMA transactions. However, this must be confirmed with Pinnacle's counsel at the earliest opportunity. Some lenders, particularly those less active in the New York market or those subject to specific secondary market requirements, may be less familiar with or less willing to accommodate the CEMA structure.
A coordination letter to Daniel Ortega at Pinnacle Federal Savings Bank is being prepared (see Lender's Counsel Coordination Letter, to be circulated under separate cover). This letter should raise the CEMA structure as a key closing mechanic and request Pinnacle's confirmation that it is willing to participate in a CEMA closing. The letter should also identify Pinnacle's outside counsel so that coordination can begin promptly.
C. Title Insurance Requirements
Granite State Title Insurance Company (title officer: Martin Clearfield) must be willing to insure the consolidated CEMA lien as a valid first-priority mortgage lien in the full amount of $78,000,000. The title company's role in a CEMA transaction is critical, as it must confirm that the chain of assignment is valid, that the consolidation does not impair lien priority, and that there are no intervening liens or encumbrances that would affect the priority of the consolidated mortgage.
Specifically, the following title insurance requirements must be addressed:
(a) Granite State must review the chain of assignment from Eastbridge to Pinnacle (or through BFO 450 West 34th LLC as intermediate assignee) and confirm that each assignment is valid and properly executed.
(b) Granite State must confirm that the CEMA instrument effectively consolidates the assigned existing mortgage and the gap mortgage into a single lien, and that the consolidated lien has first-priority status.
(c) Standard CEMA endorsements must be issued, including an endorsement confirming the consolidation and the aggregate lien amount. A date-down endorsement will also be required, bringing the title search current through the closing date.
(d) The existing Eastbridge mortgage must be confirmed as a valid, enforceable first lien on the Property, with no intervening liens, judgments, or other encumbrances recorded between the original mortgage recording date (April 14, 2011) and the closing date that would adversely affect lien priority. A gap search will be conducted to identify any such intervening matters.
(e) The Ashford Partners LLC easement (Liber 4823, Page 112) is a pre-existing encumbrance that will be shown as a Schedule B-II exception on the title commitment. This easement does not affect the mortgage lien position, as it predates the Eastbridge mortgage and has been continuously shown as an exception. It will similarly be shown as an exception in the new lender's policy.
We will coordinate with Martin Clearfield at Granite State to confirm the title company's willingness to insure the CEMA lien and to identify any special requirements or additional endorsements that may be needed. This coordination should take place concurrently with the Eastbridge and Pinnacle engagement discussed above.
D. Seller Cooperation
Meridian Gateway Holdings LLC, as the current borrower under the Eastbridge mortgage and the current owner of the Property, must cooperate in the CEMA process. The Seller's cooperation is essential because Eastbridge will typically require direction and authorization from its borrower (the Seller) before agreeing to assign the mortgage. Specifically, the Seller must:
1. Authorize and direct Eastbridge to assign (rather than satisfy) the mortgage at closing. This may take the form of a written direction letter from the Seller to Eastbridge, instructing Eastbridge to cooperate in the CEMA and to execute the assignment of mortgage.
2. Execute any required consents or estoppels in connection with the CEMA process, including any consent to the assignment of the mortgage and the related loan documents.
3. Confirm that no defaults exist under the existing Eastbridge loan documents as of the closing date. The existence of a default under the existing mortgage could impair the ability to assign the mortgage or could give rise to title insurance concerns. An estoppel certificate or borrower's affidavit confirming the absence of defaults will likely be required.
To ensure that the Seller's cooperation is contractually secured, the Purchase and Sale Agreement should include a specific CEMA cooperation covenant obligating the Seller to use commercially reasonable efforts (or best efforts, if negotiable) to cooperate in the CEMA process and to direct Eastbridge to assign, rather than satisfy, the mortgage at closing. The specific language of this covenant is discussed further in Section VII below.
It is important to note that if the Seller refuses to cooperate or if Eastbridge declines to participate, the CEMA cannot proceed. In that event, the Buyer would record a new mortgage and pay the full MRT of $2,184,000. The CEMA savings of $803,600 would be lost, but the transaction itself would not fail — the closing would simply proceed on a standard payoff-and-new-mortgage basis. The PSA should include appropriate fallback provisions to address this contingency, as discussed in the following section.
VII. PSA Provisions Related to CEMA
The draft Purchase and Sale Agreement (to be prepared on Buyer's form) should include the following provisions related to the CEMA structure. These provisions are essential to contractually secure the Seller's cooperation and to allocate the costs and risks associated with the CEMA process:
1. CEMA Cooperation Covenant. A covenant by the Seller obligating the Seller to cooperate in a CEMA transaction and to direct Eastbridge Commercial Bank, N.A. to assign, rather than satisfy, the existing mortgage at closing. The covenant should require the Seller to use commercially reasonable efforts (at a minimum) to obtain Eastbridge's cooperation, including by executing and delivering any reasonably required direction letters, consents, estoppels, and other documents necessary to effectuate the assignment. If negotiable, a "best efforts" standard would be preferable from the Buyer's perspective, though Seller's counsel may resist this and seek to limit the Seller's obligation to "commercially reasonable efforts" or "reasonable efforts."
2. Allocation of CEMA-Related Costs. A provision allocating the costs and expenses associated with the CEMA to the Buyer, since the Buyer is the party that receives the MRT savings. CEMA-related costs include any assignment or processing fee charged by Eastbridge, title company charges for CEMA endorsements and review, and incremental legal fees for document preparation and coordination. By allocating these costs to the Buyer, the Seller is held economically harmless for its cooperation, which should facilitate the Seller's willingness to participate.
3. Fallback Provision. A fallback provision expressly providing that if Eastbridge declines to cooperate in the CEMA, or if the CEMA is otherwise not feasible for any reason (including Pinnacle's unwillingness to participate or title insurance concerns), the existing Eastbridge mortgage will be satisfied at closing in the ordinary course, and the Buyer will record a new mortgage and pay the full MRT. The fallback provision should make clear that the failure to execute a CEMA shall not constitute a default by either party and shall not give rise to any right to terminate the PSA or to any claim for damages.
4. Payoff/Assignment Letter Obligation. An obligation requiring the Seller to request and deliver (or cause to be delivered) a payoff/assignment letter from Eastbridge within a specified timeframe — for example, no later than thirty (30) days prior to the closing date. The payoff/assignment letter should specify the outstanding principal balance, accrued interest, per diem interest, and any fees or charges applicable to either a payoff or a CEMA assignment, as applicable.
5. UCC-1 Assignment or Termination. A provision addressing the disposition of the UCC-1 financing statement filed in favor of Eastbridge. If a CEMA is executed, the PSA should require the Seller to cooperate in the assignment of the UCC-1 to the new lender or, alternatively, in the termination of the existing UCC-1 and the filing of a new UCC-1 in favor of Pinnacle. If a CEMA is not executed and the mortgage is satisfied, the PSA should require the Seller to deliver or cause to be delivered a UCC-3 Termination Statement for recording.
We will incorporate these provisions into the initial draft of the PSA and circulate them for your review. The CEMA cooperation covenant, in particular, is likely to be a point of negotiation with Seller's counsel, and we should be prepared to discuss the appropriate level of effort required (commercially reasonable efforts versus best efforts) and the allocation of costs.
VIII. Additional Considerations
A. CEMA Costs and Fees
While the CEMA structure yields significant MRT savings, there are incremental costs associated with the CEMA process that must be factored into the Buyer's closing budget. These costs include:
• Eastbridge Processing/Assignment Fee: Eastbridge Commercial Bank, N.A. may charge an administrative or processing fee for its cooperation in the CEMA. Based on market experience, such fees for commercial mortgage CEMAs typically range from $2,500 to $10,000, though some lenders charge higher fees depending on the complexity of the transaction and the lender's internal policies. The specific fee, if any, will need to be confirmed with Eastbridge as part of the CEMA cooperation request.
• Title Company Charges: Granite State Title Insurance Company will charge additional fees for the review and insurance of the CEMA lien structure, including charges for CEMA endorsements, the date-down endorsement, and the additional title work required to verify the chain of assignment and the absence of intervening liens. These charges are estimated at $5,000 to $15,000, depending on the complexity of the title review and the number of endorsements required.
• Additional Legal Fees: The CEMA structure involves incremental legal work, including the preparation and review of the assignment of mortgage, the gap mortgage, the CEMA instrument, and related documents. Additionally, the CEMA requires coordination among three sets of counsel: Calderwood & Harkness LLP (representing the Buyer), Hargrove, Pettigrew & Sloane LLP (representing the Seller), and Pinnacle's outside counsel (to be identified). This coordination adds to the legal fees for all parties, though the Buyer's costs are the primary concern.
Taking these incremental costs into account, the estimated total CEMA transaction costs range from approximately $10,000 to $25,000. Even at the high end of this range, the net savings after deducting transaction costs remain highly favorable:
• Net savings (low-end cost estimate): $803,600 − $10,000 = approximately $793,600
• Net savings (high-end cost estimate): $803,600 − $25,000 = approximately $778,600
The net savings of approximately $775,000 to $795,000 strongly support pursuing the CEMA structure.
B. Timeline Sensitivity
CEMA transactions add complexity to the closing process and require coordination among multiple parties: the existing lender (Eastbridge), the new lender (Pinnacle), the title company (Granite State), the Buyer (BFO 450 West 34th LLC), the Seller (Meridian Gateway Holdings LLC), and their respective counsel. Based on our experience with CEMA transactions in the New York City market, this coordination typically adds two (2) to four (4) weeks to the closing timeline compared to a standard payoff-and-new-mortgage closing.
The additional time is attributable to several factors, including: the time required for Eastbridge to process the CEMA request internally and obtain any necessary internal approvals; the preparation and negotiation of the assignment of mortgage, gap mortgage, and CEMA instrument; title company review and endorsement preparation; and the coordination of document execution and recording among multiple parties.
Given the target closing date of June 30, 2026, and the outside closing date of July 31, 2026 as contemplated in the draft letter of intent, the timeline is manageable, provided that the CEMA request to Eastbridge is initiated promptly. The PSA is targeted for execution by approximately April 11, 2026. If the CEMA cooperation request is sent to Eastbridge shortly after PSA execution — ideally by mid-to-late April 2026 — there should be adequate time for Eastbridge to process the request, for the parties to prepare and negotiate the CEMA documents, and for the closing to occur on or before June 30, 2026. Even if minor delays arise, the July 31, 2026 outside date provides an additional thirty-one (31) days of cushion.
However, if the CEMA request is delayed significantly — for example, if it is not submitted until June 2026 — there is a meaningful risk that the CEMA process will not be completed by the target closing date, and potentially not by the outside date. Accordingly, early initiation of the CEMA process is critical.
C. Impact on Capital Stack
The CEMA savings of $803,600, if achieved, will reduce the Buyer's overall closing costs and effectively reduce the total equity contribution required from Briarwood Family Office LLC to complete the acquisition. This savings flows directly to the Buyer's bottom line and improves the overall economics of the transaction.
For reference, the anticipated capital stack for the acquisition is as follows:
The preferred equity component from Caliber Point Capital Partners LP ($18,000,000 at an indicated 10.5% preferred return) is in preliminary discussions and has not yet been formalized. The terms of the preferred equity will be addressed in a separate memorandum. We note that the CEMA savings of $803,600, while not affecting the capital stack components directly, reduce the Buyer's ancillary closing costs and thereby preserve a greater portion of the equity commitment for working capital, reserves, or other transaction needs.
D. Tax Considerations
Several tax considerations are relevant to the CEMA analysis:
Transfer Tax Obligations — Unaffected by CEMA. The CEMA structure does not affect the real property transfer tax obligations of the Seller. The New York City Real Property Transfer Tax ("RPT") and the New York State Real Estate Transfer Tax ("RETT") are imposed on the conveyance of real property and are calculated based on the consideration paid (i.e., the purchase price), regardless of whether a CEMA is employed. The applicable transfer taxes are as follows:
• NYC RPT: $120,000,000 × 2.625% = $3,150,000
• NYS RETT: $120,000,000 × 0.65% = $780,000 (applicable rate for commercial property transfers where the consideration exceeds $2,000,000)
• Total transfer tax: $3,930,000
These transfer taxes are the Seller's obligation under customary New York practice (subject to PSA negotiation) and are payable at closing regardless of whether a CEMA is utilized. The CEMA affects only the mortgage recording tax, which is the Buyer's obligation.
MRT — Affected by CEMA. As discussed in detail in Sections IV and V, the CEMA structure reduces the Buyer's MRT obligation from $2,184,000 to $1,380,400, a savings of $803,600. The MRT is the Buyer's obligation.
Coordination with Tax Advisors. We recommend coordination with Edgemont Nash & Co. LLP (Laura Siddiqui, CPA), Briarwood's tax advisors, on any ancillary tax implications of the CEMA structure, including any potential state or federal income tax consequences related to the assignment and consolidation of the mortgage. While the CEMA is primarily a transactional tax savings mechanism with respect to MRT, it is prudent to confirm that the CEMA does not give rise to any unintended tax consequences at the entity or investor level.
IX. Recommendations and Next Steps
Based on the analysis set forth in this memorandum, we recommend the following actions:
1. Prepare and send CEMA cooperation request letter to Eastbridge Commercial Bank, N.A. A draft of this letter is currently underway and should be transmitted promptly after execution of the Purchase and Sale Agreement. If possible, we recommend sending the letter during the letter of intent period to gauge Eastbridge's willingness to cooperate at an early stage, thereby allowing the parties to plan the closing mechanics accordingly. The letter should identify the transaction, describe the CEMA structure, request Eastbridge's cooperation in assigning (rather than satisfying) the mortgage, and inquire about any processing fee or documentation requirements.
2. Raise CEMA structure with Pinnacle Federal Savings Bank. The CEMA structure should be included in the lender coordination letter to Daniel Ortega, Senior Vice President, Commercial Real Estate Lending, at Pinnacle. The letter should confirm Pinnacle's willingness to accept an assigned mortgage and to participate in a CEMA closing. Pinnacle's outside counsel should be identified and engaged on this topic as early as possible.
3. Discuss with Granite State Title Insurance Company. We should confirm with Martin Clearfield, the assigned title officer, that Granite State is able and willing to insure the CEMA lien as a valid first-priority mortgage lien in the amount of $78,000,000. Any special requirements, additional endorsements, or conditions for issuing the CEMA lender's policy should be identified early to allow for adequate preparation.
4. Include CEMA cooperation covenant in draft PSA. The initial draft of the Purchase and Sale Agreement should include a CEMA cooperation covenant obligating the Seller to use commercially reasonable efforts (or best efforts, if negotiable) to cooperate in the CEMA process and to direct Eastbridge to assign the existing mortgage. The PSA should also include appropriate fallback provisions in the event that the CEMA is not achievable, as discussed in Section VII above.
5. Request formal payoff/assignment letter from Eastbridge. A formal payoff/assignment letter should be requested from Eastbridge through Seller's counsel (Hargrove, Pettigrew & Sloane LLP, attention: Rebecca Tran, Esq.) or directly by the Seller, no later than mid-May 2026. The payoff/assignment letter will confirm the exact outstanding balance of the mortgage and any applicable per diem interest adjustments, and will serve as the basis for the CEMA calculations and the closing wire instructions.
6. Budget for CEMA transaction costs. The Buyer's closing budget should include an estimated $10,000 to $25,000 in incremental CEMA-related costs, including any Eastbridge processing fee, title company charges, and additional legal fees. These costs are well within the $803,600 in estimated MRT savings and represent a highly favorable cost-benefit ratio.
7. Monitor timeline. The CEMA process adds an estimated two (2) to four (4) weeks of coordination time to the closing process. It is essential to ensure that all CEMA-related actions — particularly the initial request to Eastbridge — are initiated promptly to preserve sufficient cushion before the July 31, 2026 outside closing date. We will maintain a CEMA milestone tracker and provide regular status updates to the deal team.
X. Conclusion
The CEMA structure is strongly recommended for the proposed acquisition and financing of 450 West 34th Street. The estimated mortgage recording tax savings of approximately $803,600 are substantial and well justify the incremental costs (estimated at $10,000 to $25,000) and coordination required to execute the CEMA. Even after accounting for all incremental transaction costs, the net savings to the Buyer are estimated at approximately $775,000 to $795,000 — a meaningful reduction in the Buyer's closing costs that directly benefits Briarwood Family Office LLC's overall investment economics.
The primary risk associated with the CEMA strategy is Eastbridge Commercial Bank, N.A.'s potential refusal to cooperate. As noted, Eastbridge is under no legal obligation to participate in the CEMA, and its cooperation is voluntary. If Eastbridge declines to assign the mortgage, the CEMA savings would be lost and the Buyer would pay the full MRT of $2,184,000. Importantly, however, Eastbridge's refusal to cooperate would not prevent the transaction from closing — the closing would simply proceed on a standard payoff-and-new-mortgage basis.
Early engagement with all three key counterparties — Eastbridge Commercial Bank, N.A. (existing lender), Pinnacle Federal Savings Bank (new lender), and Granite State Title Insurance Company (title insurer) — is critical to preserve the CEMA option and to maintain the transaction timeline. We recommend initiating these conversations as soon as practicable, ideally within the next two to three weeks and no later than PSA execution.