MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
TO: Angela Fontaine, Partner, Real Estate, Calderwood & Harkness LLP Margaux Ashworth-Levine, Principal & Head of Real Estate Investments, Briarwood Family Office LLC
FROM: Cynthia Ho, Associate, Real Estate, Calderwood & Harkness LLP
DATE: March 18, 2026
RE: Transfer Tax and Mortgage Recording Tax Analysis — Prospective Acquisition of 450 West 34th Street, New York, NY 10001 (Block 754, Lot 42, Borough of Manhattan)
MATTER NO.: 1026-00003
This memorandum is protected by attorney-client privilege and the work product doctrine. It has been prepared at the request of, and for the exclusive use of, the addressees in connection with legal representation in the above-referenced matter. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
Right-click to update Table of Contents
I. Executive Summary
The purpose of this memorandum is to analyze all transfer-related taxes and mortgage recording taxes applicable to the proposed acquisition of the real property and improvements located at 450 West 34th Street, New York, New York 10001 (Block 754, Lot 42, Borough of Manhattan) (the "Property") by BFO 450 West 34th LLC, a Delaware limited liability company to be formed as a single-purpose acquisition vehicle wholly owned by Briarwood Family Office LLC ("BFO" or the "Buyer"), from Meridian Gateway Holdings LLC, a New York limited liability company (the "Seller"), for a purchase price of One Hundred Twenty Million Dollars ($120,000,000) (the "Purchase Price"). This memorandum is intended to provide a comprehensive roadmap of the anticipated tax obligations arising in connection with the conveyance and related financing, to identify potential savings opportunities, and to recommend protective provisions for incorporation into the purchase and sale agreement (the "PSA").
Based on our analysis of the applicable provisions of the New York Tax Law, the New York City Administrative Code, and relevant regulatory guidance, we estimate the total transfer-related and mortgage recording tax obligations associated with this transaction as follows:
New York City Real Property Transfer Tax ("NYC RPT"): $3,150,000, calculated at the applicable rate of 2.625% on the full $120,000,000 consideration. Per the terms of the executed Letter of Intent dated March 14, 2026 (the "LOI"), payment of NYC RPT is a Seller obligation.
New York State Real Estate Transfer Tax ("NYS RETT"): $780,000, calculated at the applicable combined rate of 0.65% on the full $120,000,000 consideration. Per the LOI, payment of NYS RETT is also a Seller obligation.
Total Transfer Taxes: $3,930,000 (Seller obligation).
Mortgage Recording Tax ("MRT"): On the proposed $78,000,000 senior mortgage loan from Pinnacle Federal Savings Bank ("Pinnacle"), the MRT at the combined NYC/NYS rate of 2.80% would total $2,184,000 if calculated on the full principal amount of the new mortgage (Buyer obligation). However, if a Consolidation, Extension, and Modification Agreement ("CEMA") structure is successfully implemented utilizing the existing Eastbridge Commercial Bank, N.A. ("Eastbridge") mortgage (estimated payoff balance approximately $28,700,000), the MRT obligation may be reduced to $1,380,400, yielding potential savings of $803,600 to the Buyer.
New York State "Mansion Tax": Based on our analysis of the applicable statutory provisions and available guidance, we conclude that the mansion tax imposed under New York Tax Law § 1402-a should not apply to this transaction. The Property is a mixed-use commercial building being conveyed as a single parcel, and the residential component does not constitute a "one to three family house" or "individual residential condominium units" within the meaning of the statute. This conclusion is discussed in detail in Section VI below. We have assessed the risk of a contrary determination as low but recommend confirmatory review by the Buyer's tax advisors and inclusion of protective language in the PSA.
This memorandum is governed by, and our analysis is based upon, the New York Tax Law (including Articles 11 and 31) and the New York City Administrative Code (Title 11, Chapter 21 and Title 11, Chapter 26), as currently in effect. This memorandum supplements the financing strategy memorandum and the existing financing / CEMA feasibility memorandum that have been prepared separately in connection with this matter, and should be read in conjunction with those documents.
II. Transaction Overview
Set forth below is a summary of the material terms of the proposed transaction, as reflected in the LOI and as discussed with the parties and their respective advisors. These terms form the basis for the tax analysis contained in this memorandum.
Buyer. BFO 450 West 34th LLC (the "Buyer" or "BFO SPV"), a Delaware limited liability company to be formed as a single-purpose acquisition vehicle. The sole member of the Buyer will be Briarwood Family Office LLC, a Delaware limited liability company. The Buyer's organizational documents will be prepared and filed in advance of PSA execution, and the entity is expected to be in good standing in both Delaware and New York prior to closing.
Seller. Meridian Gateway Holdings LLC (EIN 27-6831044), a New York limited liability company (the "Seller" or "Meridian"). The managing members of the Seller are Victor S. Papadopoulos and Elena K. Rosenberg. The Seller acquired the Property in 2011 for a reported purchase price of $68,500,000 and has since made capital improvements estimated at approximately $14,200,000, resulting in an estimated aggregate basis of approximately $82,700,000 (subject to depreciation adjustments).
Property. The real property and improvements commonly known as 450 West 34th Street, New York, New York 10001, designated on the Tax Map of the City of New York as Block 754, Lot 42, in the Borough of Manhattan (the "Property"). The Property consists of a 14-story mixed-use building containing approximately 186,400 square feet of gross building area ("GBA"), improved as follows:
• Floors 1–2 (Retail): Approximately 28,600 square feet of ground-floor and second-floor retail space, currently occupied by multiple tenants under commercial leases.
• Floors 3–9 (Office): Approximately 97,300 square feet of Class B office space, currently approximately 82% leased to a mix of professional, creative, and technology tenants.
• Floors 10–14 (Residential): 38 residential rental units comprising approximately 42,500 square feet of residential space. The residential units include a mix of stabilized and market-rate apartments.
• Cellar Level (Storage/Mechanical): Approximately 18,000 square feet of cellar-level space used for building storage, mechanical systems, and utility infrastructure.
The Property is located within a C6-4 zoning district, as confirmed by Halcyon Planning Associates LLC (Mark Espinoza), and is classified for New York City real property tax purposes as a commercial mixed-use property. The zoning classification and property tax classification are relevant to the determination of the applicable transfer tax rates, as discussed in Sections III and IV below.
Purchase Price. The agreed-upon purchase price for the Property is One Hundred Twenty Million Dollars ($120,000,000), payable in cash (including loan proceeds) at closing, subject to customary closing adjustments and prorations.
Form of Conveyance. The Seller will convey the Property to the Buyer by bargain and sale deed with covenant against grantor's acts, in the form customary for commercial real property transactions in New York City.
Proposed Capital Stack. The acquisition is expected to be financed as follows:
• Senior Mortgage Loan: $78,000,000 from Pinnacle Federal Savings Bank, representing approximately 65% of the Purchase Price (loan-to-value). The senior mortgage will be a first lien on the Property and will be recorded with the City Register of the City of New York.
• Preferred Equity: $18,000,000 from Caliber Point Capital Partners LP, representing approximately 15% of the Purchase Price, to be structured as a preferred equity interest in BFO 450 West 34th LLC pursuant to the terms of a separate preferred equity agreement.
• BFO Equity: $24,000,000 of equity contributed by Briarwood Family Office LLC, representing approximately 20% of the Purchase Price.
Existing Mortgage. The Property is currently encumbered by a mortgage in favor of Eastbridge Commercial Bank, N.A. (the "Existing Mortgage"), which was originally recorded in the principal amount of $41,100,000 on April 14, 2011, as reflected in the records of the Automated City Register Information System ("ACRIS"). Based on information provided by the Seller's counsel, the estimated payoff balance of the Existing Mortgage at or about the anticipated closing date is approximately $28,700,000. The Existing Mortgage is significant to the MRT analysis because of the potential to achieve substantial MRT savings through a CEMA structure, as discussed in Section VII below.
Closing Timeline. The parties have established a target closing date of June 30, 2026, with an outside closing date of July 31, 2026. The LOI was executed on March 14, 2026, and the parties intend to negotiate and execute the PSA on or before April 11, 2026. Pre-closing diligence, including title examination, survey review, environmental assessment, and lease review, is expected to proceed in parallel with PSA negotiations.
III. New York City Real Property Transfer Tax (NYC RPT)
A. Statutory Framework
The New York City Real Property Transfer Tax is imposed pursuant to Chapter 21 of Title 11 of the New York City Administrative Code (§§ 11-2101 through 11-2115) (the "RPT"). The RPT is administered by the New York City Department of Finance. Section 11-2102 of the Administrative Code imposes a tax on each deed at the time of delivery by a grantor to a grantee, when the deed conveys an interest in real property or an economic interest in an entity owning real property located within the City of New York, and when the consideration for the conveyance exceeds $25,000. The RPT applies to all five boroughs of New York City and is in addition to any state-level transfer taxes imposed under New York Tax Law Article 31.
The NYC Rules of the City of New York, Title 19, Chapter 23, provide implementing regulations and further guidance on the computation and payment of the RPT, including rules addressing the determination of "consideration," the treatment of mortgage assumptions, the handling of conveyances between related parties, and exemptions from the tax.
For purposes of this transaction, the RPT will be imposed on the delivery of the bargain and sale deed conveying the fee interest in the Property from the Seller to the Buyer. The conveyance constitutes a transfer of an interest in improved real property for consideration exceeding $25,000, and no exemption from the RPT is applicable to this transaction.
B. Applicable Rate
The RPT rate schedule distinguishes between (i) conveyances of one-, two-, or three-family houses and individual residential condominium units, and (ii) all other conveyances of real property. For each category, there is a base tax rate and, where the consideration exceeds $500,000, an additional tax rate. The applicable rates are as follows:
One-, two-, or three-family houses and individual residential condominium units:
• Base rate (consideration $500,000 or less): 1.00% of consideration
• Combined rate (consideration exceeding $500,000): 1.425% of consideration (1.00% base + 0.425% additional tax)
All other conveyances (including commercial, industrial, and mixed-use properties):
• Base rate (consideration $500,000 or less): 1.425% of consideration
• Combined rate (consideration exceeding $500,000): 2.625% of consideration (1.425% base + 1.200% additional tax, as provided in § 11-2102(a) and (b))
The Property is a 14-story mixed-use building encompassing retail, office, and residential uses. Although the building contains 38 residential rental units, the Property as a whole does not constitute a "one-, two-, or three-family house" and the conveyance is not of "individual residential condominium units." Accordingly, the conveyance falls within the "all other conveyances" category and is subject to the higher combined rate. Because the consideration of $120,000,000 exceeds $500,000, the applicable rate is 2.625% of the full consideration, comprising the 1.425% base tax and the 1.200% additional tax.
We note that there is no mechanism under the RPT statute to bifurcate the consideration between the residential and commercial components of a mixed-use property for purposes of applying different tax rates. The entire consideration is taxed at the single applicable rate determined by the character of the overall conveyance. Because the Property is not a qualifying residential property (i.e., it is not a one-, two-, or three-family house), the 2.625% rate applies to the entire $120,000,000 purchase price.
C. Calculation. The NYC RPT payable in connection with the conveyance of the Property is calculated as follows:
Consideration: $120,000,000
RPT Rate: 2.625%
NYC RPT = $120,000,000 × 0.02625 = $3,150,000
D. Allocation of Obligation
Under the terms of the executed LOI dated March 14, 2026, the Seller (Meridian Gateway Holdings LLC) has agreed to be responsible for the payment of the NYC RPT in connection with the conveyance. This allocation is consistent with prevailing market custom in New York City commercial real property transactions, where the seller customarily bears the RPT obligation as a cost of the conveyance.
It is important to note, however, that as a matter of statutory obligation, the RPT is imposed upon the "grantor" (i.e., the Seller), and the grantor is primarily liable for payment. See NYC Admin. Code § 11-2103. If the grantor fails to pay, the grantee (Buyer) may be held jointly and severally liable. Accordingly, we recommend that the PSA include an explicit provision confirming the Seller's obligation to pay the NYC RPT in full at closing, together with an indemnification by the Seller in favor of the Buyer with respect to any failure to pay or any deficiency assessed by the NYC Department of Finance with respect to the RPT. This indemnification should expressly survive the closing of the transaction for a period consistent with the applicable statute of limitations (generally three years from the date of filing of the RPT return).
E. Filing Requirements
The NYC RPT return (Form NYC-RPT) must be filed with the New York City Department of Finance at or prior to the recording of the deed with the City Register of the City of New York. The City Register will not accept a deed for recording unless the RPT return has been filed and the RPT has been paid in full, or an exemption from payment has been properly claimed and documented. The RPT return requires disclosure of the parties to the transaction, a description of the property, the consideration paid, the tax computed, and other information required by the Department of Finance. The Seller's counsel is customarily responsible for preparation of the RPT return, and we recommend confirming this responsibility in the PSA.
Payment of the RPT is typically made by the Seller's attorney by certified check or wire transfer to the Department of Finance in conjunction with the submission of the deed and related closing documents for recording. We will coordinate with the Seller's counsel and with the title company, Granite State Title Insurance Company ("Granite State"), to ensure that the RPT is properly computed, paid, and documented at closing.
IV. New York State Real Estate Transfer Tax (NYS RETT)
A. Statutory Framework
The New York State Real Estate Transfer Tax is imposed pursuant to Article 31 of the New York Tax Law (§§ 1401 through 1410) (the "RETT"). The RETT is administered by the New York State Department of Taxation and Finance and is imposed on each conveyance of real property or interest therein where the consideration for the conveyance exceeds $500. The RETT is distinct from, and in addition to, the NYC RPT discussed in Section III above, and both taxes are payable in connection with the recording of a deed conveying real property located within New York City.
Section 1402 of the New York Tax Law imposes the base RETT at the rate of $2.00 per $500 of consideration, or fractional part thereof (equivalent to 0.40% of consideration). In addition to the base tax, Section 1402-a imposes a supplemental tax—commonly referred to as the "mansion tax"—on certain conveyances of residential real property, which is analyzed separately in Section VI of this memorandum. Further, for conveyances of real property other than residential real property where the consideration exceeds $2,000,000, a surcharge of 0.25% is imposed under Tax Law § 1402-b (the so-called "commercial surcharge"), bringing the effective rate for qualifying commercial and mixed-use conveyances to 0.65%.
B. Applicable Rate
The determination of the applicable RETT rate requires an analysis of the character of the property being conveyed and the amount of consideration. The rate structure is as follows:
Base Rate: $2.00 per $500 of consideration (0.40%), applicable to all conveyances where consideration exceeds $500.
Additional Rate for Commercial/Non-Residential Conveyances Exceeding $2,000,000: An additional 0.25% surcharge, resulting in a combined effective rate of 0.65%, applies to conveyances of real property (other than residential real property as defined for purposes of the mansion tax) where the consideration exceeds $2,000,000.
The Property is a mixed-use building with a predominant commercial character. The commercial components of the Property (retail and office space) comprise approximately 125,900 square feet out of a total GBA of approximately 186,400 square feet, or approximately 67.5% of the building by area. The residential component (38 rental units on Floors 10–14) comprises approximately 42,500 square feet, or approximately 22.8% of the building by area. The balance (approximately 18,000 square feet) consists of cellar-level storage and mechanical space.
Because the Property is a single parcel being conveyed in its entirety, and the predominant use by square footage is commercial, the entire conveyance is treated as a conveyance of commercial (non-residential) real property for purposes of the RETT rate determination. The consideration of $120,000,000 exceeds $2,000,000, and accordingly the commercial surcharge applies. The applicable combined RETT rate is therefore 0.65% of the full consideration.
C. Calculation. The NYS RETT payable in connection with the conveyance of the Property is calculated as follows:
Consideration: $120,000,000
RETT Rate: 0.65%
NYS RETT = $120,000,000 × 0.0065 = $780,000
D. Allocation of Obligation
Under the terms of the executed LOI, the Seller is responsible for payment of the NYS RETT. As with the NYC RPT, this allocation is consistent with prevailing custom in New York City commercial real property transactions, where the seller customarily bears the RETT as a cost of the conveyance.
Statutory liability for the RETT falls on the "grantor" (i.e., the Seller). See N.Y. Tax Law § 1404. However, if the grantor fails to pay the RETT, the "grantee" (Buyer) is jointly and severally liable for the tax. We therefore recommend that the PSA include an express covenant by the Seller to pay the NYS RETT in full at closing, along with an indemnification obligation running in favor of the Buyer with respect to any RETT deficiency or assessment arising from the transaction.
E. Filing Requirements
The following tax forms must be filed in connection with the conveyance:
Form TP-584 (Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax): This is the primary NYS transfer tax return and must be filed with the recording officer (City Register) at the time the deed is submitted for recording. Form TP-584 requires disclosure of the consideration, calculation of the RETT, and certification by both the grantor and the grantee. It also includes schedules addressing the mortgage recording tax and the credit line mortgage certificate, and must be completed in full.
Form RP-5217 (Real Property Transfer Report): This form, required by the New York State Office of Real Property Tax Services, is a statistical reporting form that collects information about the property and the terms of the transfer. Filing of Form RP-5217 is a precondition to recording the deed; the City Register will not accept a deed for recording without a completed RP-5217. The form requires information about the property class, the nature of the conveyance, the consideration, the property condition, and other data used for assessment purposes.
Both forms will be prepared by Calderwood & Harkness LLP in coordination with the Seller's counsel and submitted to the City Register as part of the closing document package. We will also coordinate with Edgemont Nash & Co. LLP (Laura Siddiqui, CPA) on the preparation and review of these returns to ensure accuracy and consistency with the overall tax reporting for the transaction.
V. Total Transfer Tax Summary
The following summarizes the total transfer tax obligations arising from the conveyance of the Property from the Seller to the Buyer:
The entire $3,930,000 in transfer taxes is a Seller obligation under the terms of the LOI, and this allocation will be confirmed and documented in the PSA.
Impact on Seller's Net Proceeds. The transfer taxes represent a significant closing cost for the Seller and will reduce the Seller's net proceeds from the transaction. A preliminary estimate of the Seller's net proceeds is set forth below for informational purposes:
The Seller's implied pre-depreciation capital gain on the transaction can be estimated as follows:
The actual gain recognized by the Seller will depend on the Seller's adjusted basis after accounting for depreciation deductions claimed during the holding period. The Seller's income tax obligations are being analyzed separately by the Seller's own tax advisors and are not within the scope of this memorandum.
VI. New York State "Mansion Tax" Analysis — Residential Component
A. Statutory Framework
New York Tax Law § 1402-a imposes an additional transfer tax — commonly known as the "mansion tax" — on each conveyance of "residential real property" where the consideration for the conveyance is $1,000,000 or more. The mansion tax is payable by the grantee (Buyer), in contrast to the RETT base tax, which is a grantor (Seller) obligation.
As amended effective July 1, 2019, the mansion tax is imposed at graduated rates based on the amount of consideration, as follows:
The graduated rate structure applies to the full amount of consideration — not merely the excess over each threshold — such that the highest applicable rate applies to the entire consideration once the relevant threshold is exceeded. Given the $120,000,000 Purchase Price, if the mansion tax were determined to apply, the exposure would be calculated at the 3.90% rate applicable to consideration of $25,000,000 or more.
B. Applicability to Mixed-Use Property
The critical question for purposes of this transaction is whether the conveyance of the Property triggers mansion tax liability, notwithstanding that the Property is predominantly commercial in character.
New York Tax Law § 1402-a defines "residential real property" as "real property improved by a one to three family house or individual residential condominium units." This definition is narrow and specific. In applying this definition to the Property, we note the following:
The Property is not a "one to three family house." The Property is a 14-story mixed-use building containing 38 residential rental units in addition to retail and office space. By no reasonable interpretation can it be characterized as a "one to three family house." The statutory language is clear on its face, and neither the legislative history nor the available regulatory guidance suggests that the mansion tax was intended to apply to multi-family rental properties of this nature.
The conveyance is not of "individual residential condominium units." The 38 residential units in the Property are rental apartments within a single tax lot (Block 754, Lot 42). They are not condominium units; the building has not been subjected to a condominium declaration under Article 9-B of the New York Real Property Law, and the conveyance is of the entire property as a single parcel — not of individual residential units. The conveyance of a fee interest in a mixed-use building that happens to contain residential rental units is fundamentally different from the conveyance of individual condominium units, which is the scenario contemplated by the statute.
The Property is being conveyed as a single, undivided parcel. The deed will convey the entirety of Block 754, Lot 42, encompassing all uses within the building. There is no allocation of consideration among the different use components for purposes of the conveyance, and no separate conveyance of the residential component is being effected.
Based on the foregoing analysis, it is our conclusion that the mansion tax imposed under New York Tax Law § 1402-a should not apply to this transaction. The conveyance is of a mixed-use commercial property that does not fall within the statutory definition of "residential real property." This conclusion is consistent with the plain language of the statute and with the guidance provided by the New York State Department of Taxation and Finance in various Technical Services Bureau Memoranda ("TSB-M") addressing the scope of the mansion tax.
Recommendation. While we are confident in this analysis, we recommend the following confirmatory and protective measures:
1. Confirm our analysis with Laura Siddiqui, CPA, at Edgemont Nash & Co. LLP, who serves as the Buyer's tax advisor for this transaction.
2. Monitor for any recent TSB-M advisory memoranda, opinion letters, or legislative amendments that may bear on the applicability of the mansion tax to mixed-use properties.
3. Include protective language in the PSA addressing the allocation of mansion tax risk in the event that the NYC Department of Finance or the NYS Department of Taxation and Finance takes a contrary position and assesses the mansion tax on all or a portion of the consideration.
C. Risk Assessment
We assess the risk of mansion tax imposition on this transaction as low based on the current statutory language and available guidance. However, because the consequences of a contrary determination could be material, we believe it is prudent to quantify the potential exposure.
If the City Register or the Department of Taxation and Finance were to assert that the mansion tax applies to the residential component of the Property, the potential exposure would depend on the methodology used to allocate consideration between the residential and non-residential components. A rough proportional allocation by square footage would yield the following result:
Allocated consideration to residential component:
$120,000,000 × (42,500 SF / 186,400 SF) = approximately $27,361,000
At the highest mansion tax rate of 3.90% (applicable to consideration of $25,000,000 or more):
Potential additional mansion tax = $27,361,000 × 0.039 = approximately $1,067,000
This worst-case scenario is considered unlikely but is noted for the Buyer's awareness and for purposes of evaluating the appropriate risk allocation provisions in the PSA. If the mansion tax were imposed on the full $120,000,000 consideration (an even more remote scenario), the exposure would be $120,000,000 × 0.039 = $4,680,000. We consider this latter scenario to be highly improbable given the clear statutory language limiting the mansion tax to "residential real property."
VII. Mortgage Recording Tax (MRT)
A. Statutory Framework
The Mortgage Recording Tax is imposed under two separate but complementary statutory schemes applicable to mortgages recorded on property located within New York City:
New York State Mortgage Recording Tax: Imposed under Article 11 of the New York Tax Law (§§ 253 through 258), the state MRT applies to the recording of each mortgage of real property situated in New York State. The base state MRT rate is $0.50 per $100 of principal debt or obligation secured (0.50%). An additional state tax of $0.25 per $100 (0.25%) is imposed under Tax Law § 253(1-a) on mortgages recorded in counties within the Metropolitan Commuter Transportation District (which includes all five boroughs of New York City).
New York City Mortgage Recording Tax: Imposed under Chapter 26 of Title 11 of the New York City Administrative Code (§ 11-2601 et seq.), the city MRT is imposed in addition to the state MRT on mortgages recorded on property located within New York City. For mortgages securing principal debt or obligations exceeding $500,000, the city MRT rate is 1.75%. An additional city surcharge of 0.30% applies to certain mortgages.
For commercial mortgages recorded in New York City where the principal debt or obligation exceeds $500,000, the combined MRT rate is calculated as follows:
The MRT is payable at the time the mortgage is submitted for recording with the City Register. It is an obligation of the mortgagor (borrower), though the mortgagee (lender) may also be liable in certain circumstances. As a practical matter, the borrower customarily pays the MRT in connection with the closing of the mortgage loan.
B. Standard MRT Calculation (Without CEMA)
If the proposed $78,000,000 senior mortgage from Pinnacle Federal Savings Bank is recorded as a new mortgage without utilizing a CEMA structure, the MRT would be calculated on the full principal amount of the mortgage as follows:
Mortgage Principal: $78,000,000
Combined MRT Rate: 2.80%
MRT = $78,000,000 × 0.028 = $2,184,000
This amount would be payable by the Buyer (as borrower under the mortgage loan) at the time the mortgage is submitted for recording with the City Register. The MRT represents a significant closing cost and is the single largest tax obligation borne by the Buyer in this transaction. For this reason, exploration of the CEMA opportunity discussed below is of substantial economic importance to the Buyer.
C. CEMA Opportunity — Consolidation, Extension, and Modification Agreement
1. CEMA Overview. New York Tax Law § 255 provides a mechanism by which the MRT may be reduced when an existing mortgage on a property is assigned, rather than satisfied and discharged, in connection with a refinancing or acquisition. Under a CEMA structure, the existing mortgage is assigned by the existing lender to the new lender (or to the borrower as an intermediate step), and the existing mortgage is then consolidated with the new mortgage and modified to reflect the new loan terms. Because the existing mortgage has already been subjected to MRT at the time of its original recording, the MRT on the consolidated and modified mortgage is payable only on the amount of "new money" advanced — that is, the excess of the new mortgage principal over the principal amount of the existing mortgage being assigned and consolidated.
The CEMA structure is widely used in New York City commercial real property transactions and can result in very substantial MRT savings, particularly where there is a large existing mortgage on the property. In this case, the Existing Mortgage held by Eastbridge Commercial Bank, N.A. presents a significant CEMA opportunity.
The key facts relevant to the CEMA analysis are as follows:
• Existing Mortgage: Originally recorded in the principal amount of $41,100,000 on April 14, 2011, in favor of Eastbridge Commercial Bank, N.A., as reflected in the ACRIS records maintained by the City Register.
• Estimated Payoff Balance: Approximately $28,700,000 as of the anticipated closing date, based on information provided by the Seller's counsel. The precise payoff amount will be confirmed by obtaining a formal payoff statement from Eastbridge closer to the closing date.
• New Mortgage: $78,000,000 from Pinnacle Federal Savings Bank.
Under a CEMA structure, Eastbridge would assign the Existing Mortgage (in the amount of the payoff balance, approximately $28,700,000) to Pinnacle (or to the Buyer as borrower, with a subsequent assignment to Pinnacle). The assigned mortgage would then be consolidated with Pinnacle's new mortgage and modified to reflect the terms of the Pinnacle loan. MRT would be payable only on the "new money" — i.e., the difference between the new mortgage principal and the assigned mortgage amount.
2. CEMA MRT Calculation. The MRT payable under a CEMA structure would be calculated as follows:
New Mortgage Amount: $78,000,000
Existing Mortgage Amount (to be assigned): $28,700,000
New Money: $78,000,000 − $28,700,000 = $49,300,000
MRT Rate: 2.80%
MRT on New Money = $49,300,000 × 0.028 = $1,380,400
3. CEMA Savings. The CEMA structure would yield the following savings to the Buyer:
The potential savings of $803,600 represent a significant reduction in the Buyer's closing costs and strongly support the pursuit of a CEMA structure. We recommend that the Buyer make the achievement of a CEMA a priority in pre-closing negotiations and coordination.
4. CEMA Requirements and Practical Considerations. The successful implementation of a CEMA structure requires the cooperation and coordination of multiple parties, including the existing lender (Eastbridge), the new lender (Pinnacle), the title company (Granite State), and the attorneys for all parties. The following are the key requirements and practical considerations:
Eastbridge Cooperation. Eastbridge Commercial Bank, N.A. must agree to assign, rather than satisfy and discharge, the Existing Mortgage. Eastbridge has no legal obligation to cooperate in a CEMA, and its willingness to do so must be secured through negotiation. Most institutional lenders in New York City will agree to cooperate in a CEMA in exchange for payment of an assignment fee. Assignment fees in the current market typically range from $1,000 to $5,000 as a flat fee, although some lenders charge higher fees or impose additional conditions. We have prepared a CEMA cooperation request letter for transmission to Eastbridge, which is being circulated under separate cover for review prior to transmittal. The request letter should be sent to Eastbridge as promptly as practicable to allow sufficient time for Eastbridge's internal review and approval process.
Pinnacle Participation. Pinnacle Federal Savings Bank must agree to participate in the CEMA structure and to accept the assignment and consolidation of the Existing Mortgage with its new mortgage. We recommend immediate coordination with Daniel Ortega, Senior Vice President of Commercial Real Estate Lending at Pinnacle, and with Pinnacle's outside counsel, to confirm Pinnacle's willingness to proceed on a CEMA basis and to identify any additional requirements or conditions that Pinnacle may impose. Most institutional lenders in New York City are familiar with the CEMA process and routinely participate in CEMA transactions, but the specific requirements may vary from lender to lender and should be confirmed early in the process.
Title Insurance Considerations. Granite State Title Insurance Company, acting through Title Officer Martin Clearfield, must issue endorsements to the new lender's title insurance policy reflecting the CEMA structure — specifically, an endorsement insuring the validity and enforceability of the consolidated and modified mortgage as a first lien on the Property. The existing title policy (Policy No. GST-2011-04872, issued in favor of Eastbridge in the insured amount of $68,500,000) should be reviewed for CEMA compatibility, including any restrictions or conditions that may affect the assignability of the policy or the issuance of endorsements. We will coordinate with Martin Clearfield to ensure that all title requirements for the CEMA are identified and satisfied in advance of closing.
UCC-1 Financing Statement. The Existing Mortgage is likely accompanied by a UCC-1 Financing Statement filed by Eastbridge against the Seller as debtor, covering fixtures and other personal property related to the Property. The CEMA transaction will need to address the disposition of this UCC-1 filing — either through assignment of the UCC-1 from Eastbridge to Pinnacle (by UCC-3 amendment) or through termination of the existing filing and submission of a new UCC-1 by Pinnacle. The appropriate treatment will depend on the requirements of Pinnacle and its counsel and will need to be coordinated as part of the overall CEMA process.
Timing Considerations. The CEMA process adds a layer of complexity and coordination to the closing process and requires lead time for Eastbridge's internal approval, preparation of assignment documents, and title endorsement work. Given the target closing date of June 30, 2026, we recommend initiating the CEMA process immediately — ideally within the next two weeks — to ensure that all necessary approvals, documents, and endorsements are in place well in advance of closing. Any delay in Eastbridge's cooperation could jeopardize the CEMA and, consequently, the $803,600 in potential MRT savings.
5. Risks to CEMA. While we are optimistic about the feasibility of a CEMA in this transaction, a number of risks should be noted:
Eastbridge Refusal or Delay. Eastbridge has no legal obligation to cooperate in a CEMA. If Eastbridge declines to assign the Existing Mortgage — or imposes conditions that are commercially unreasonable or that cannot be satisfied within the available time frame — the CEMA will not be achievable, and the Buyer will be required to pay the full MRT of $2,184,000 on the new Pinnacle mortgage. While refusal by institutional lenders is uncommon in the New York City market, it cannot be ruled out, particularly if Eastbridge is in the process of selling its loan portfolio, undergoing a merger, or otherwise unable to accommodate the request within the available time frame.
Pinnacle Requirements. Pinnacle may impose additional requirements for participating in the CEMA — for example, requirements regarding the form of the assignment documents, the timing of the assignment, the treatment of the UCC-1 filing, or the title endorsements. If Pinnacle's requirements conflict with Eastbridge's capabilities or willingness, the CEMA may be delayed or rendered infeasible.
Payoff Amount Variability. The CEMA MRT savings are directly proportional to the amount of the Existing Mortgage being assigned. If the actual payoff balance of the Existing Mortgage at closing differs from the estimated $28,700,000 — for example, due to additional principal payments, prepayment premiums, or outstanding escrow obligations — the "new money" calculation and the resulting MRT savings will change proportionally. A lower payoff balance would mean less mortgage being assigned, higher "new money," and reduced CEMA savings. A higher payoff balance would have the opposite effect.
PSA Provision. We recommend that the PSA include a provision addressing CEMA cooperation risk. Specifically, the PSA should require the Seller to use commercially reasonable efforts to cause Eastbridge to assign (rather than satisfy and discharge) the Existing Mortgage and to cooperate in all respects necessary to effectuate the CEMA. The PSA should also establish a clear fallback mechanism providing that, if a CEMA cannot be achieved despite the Seller's commercially reasonable efforts, the Buyer will pay the full MRT on the new Pinnacle mortgage and the transaction will proceed without a CEMA. The PSA should allocate the risk of the CEMA assignment fee (whether payable by the Seller or the Buyer) and should address the consequences of any delay caused by the CEMA process on the closing timeline.
VIII. Summary of All Tax Obligations
Estimated Tax Obligations at Closing
The following table consolidates all estimated transfer-related taxes and mortgage recording taxes applicable to the transaction:
Total Buyer Tax Exposure
Best Case (CEMA achieved): $1,380,400 (MRT on new money only)
Worst Case (no CEMA): $2,184,000 (full MRT on $78,000,000 mortgage)
Potential Additional Exposure (mansion tax, if assessed on residential component — low probability): Up to approximately $1,067,000
Total Seller Tax Obligation
$3,930,000 (comprising $3,150,000 NYC RPT and $780,000 NYS RETT)
This amount is non-variable and is not subject to reduction through any available tax savings mechanism. The Seller's obligation is fixed based on the $120,000,000 Purchase Price and the applicable statutory rates.
IX. PSA Recommendations
Based on the foregoing analysis, we recommend that the following provisions be incorporated into the PSA to properly document the allocation of tax obligations, to provide appropriate protections for the Buyer, and to facilitate the CEMA process:
1. Express Allocation of Transfer Taxes. The PSA should include an explicit provision confirming that the Seller is responsible for the payment of all transfer taxes arising from the conveyance, including (a) the NYC Real Property Transfer Tax in the amount of $3,150,000 (or such other amount as may be computed based on the final consideration at closing) and (b) the NYS Real Estate Transfer Tax in the amount of $780,000 (or such other amount as may be computed based on the final consideration at closing). The provision should state that the Buyer is responsible for the payment of all Mortgage Recording Taxes in connection with the Buyer's mortgage financing.
2. Seller Cooperation Covenant for CEMA. The PSA should include a covenant by the Seller to use commercially reasonable efforts to cause Eastbridge Commercial Bank, N.A. to assign (rather than satisfy and discharge) the Existing Mortgage in connection with the closing, and to cooperate in all respects reasonably necessary to effectuate the CEMA, including by executing such documents and providing such information as may be reasonably required by Pinnacle, Eastbridge, Granite State, and their respective counsel. The PSA should allocate responsibility for the Eastbridge assignment fee (we recommend that the Buyer bear this cost, as the CEMA savings inure to the Buyer's benefit, though this is subject to negotiation).
3. Seller Indemnification for Transfer Tax Obligations. The PSA should include a Seller indemnification in favor of the Buyer with respect to any and all transfer tax obligations arising from the conveyance, including any assessments, deficiencies, penalties, or interest imposed by the NYC Department of Finance or the NYS Department of Taxation and Finance in connection with the NYC RPT or the NYS RETT. This indemnification should expressly survive the closing for a period of not less than three (3) years (or such longer period as may be consistent with the applicable statute of limitations).
4. Mansion Tax Contingency. The PSA should address the allocation of risk in the unlikely event that the mansion tax is assessed on all or a portion of the consideration attributable to the residential component of the Property. We recommend a provision specifying that (a) the Seller shall be responsible for any transfer-tax-related assessments attributable to the conveyance (including any mansion tax assessed against the Buyer that is more properly characterized as a transfer tax obligation) and (b) the Buyer accepts responsibility for the MRT and for the mansion tax to the extent, if any, that the mansion tax is ultimately determined to be applicable to the transaction. Given the low probability of mansion tax applicability, this provision may be the subject of negotiation with the Seller's counsel, and we are prepared to discuss alternative formulations if needed.
5. Tax Return Filing. The PSA should include a provision requiring the timely preparation and filing of all required transfer tax returns and reports, including Form NYC-RPT, Form TP-584, and Form RP-5217, in connection with the recording of the deed. The PSA should designate which party (or which party's counsel) is responsible for preparation of each return and should require cooperation by both parties in providing all information necessary for the accurate completion of such returns.
6. Real Property Tax Proration. While not a transfer tax, the PSA should also address the proration of real property taxes at closing. The annual real property tax for the Property for the City of New York fiscal year 2025/2026 is approximately $2,640,000. Real property taxes should be prorated as of the closing date on a per diem basis, with the Seller responsible for taxes attributable to the period prior to and including the closing date and the Buyer responsible for taxes attributable to the period after the closing date. This proration is a separate closing adjustment and is noted here for completeness, although it is not a transfer tax obligation per se.
X. Coordination with Advisors
The successful completion of this transaction, including the optimization of the Buyer's tax position and the achievement of CEMA savings, will require close coordination among the following advisors and service providers. Set forth below is a summary of the key contacts and their roles in connection with the transfer tax and MRT analysis:
Edgemont Nash & Co. LLP — Laura Siddiqui, CPA. Ms. Siddiqui serves as the Buyer's tax advisor for the transaction. We recommend coordinating with Ms. Siddiqui to (a) confirm the mansion tax non-applicability analysis set forth in Section VI above, (b) coordinate on the preparation of transfer tax returns (Form NYC-RPT, Form TP-584, and Form RP-5217), and (c) review the real property tax proration calculations to be reflected in the closing statement. Ms. Siddiqui's office should also be consulted regarding any state or city tax reporting obligations that may arise from the formation of BFO 450 West 34th LLC as a Delaware LLC operating in New York.
Granite State Title Insurance Company — Martin Clearfield, Title Officer. Mr. Clearfield is the designated title officer for the transaction and will be responsible for issuing the owner's title insurance policy in favor of the Buyer and the lender's title insurance policy in favor of Pinnacle. In connection with the CEMA, Mr. Clearfield will need to (a) review the existing title policy (Policy No. GST-2011-04872) for CEMA compatibility, (b) prepare and issue endorsements reflecting the assignment, consolidation, extension, and modification of the mortgage, and (c) ensure that the CEMA title requirements are satisfied in the title commitment for the new lender's policy at the insured amount of $120,000,000 (or such higher amount as Pinnacle may require). Early engagement with Mr. Clearfield on the CEMA structure is essential.
Pinnacle Federal Savings Bank — Daniel Ortega, SVP, CRE Lending. Mr. Ortega is the Buyer's primary contact at Pinnacle for the senior mortgage loan. We recommend confirming with Mr. Ortega at the earliest opportunity that Pinnacle is willing and able to participate in the CEMA structure, and identifying any specific requirements, conditions, or documentation that Pinnacle will require in connection with the CEMA. Mr. Ortega should also be consulted regarding Pinnacle's preferences for the treatment of the UCC-1 Financing Statement and the form of the CEMA agreement.
Eastbridge Commercial Bank, N.A. Eastbridge is the holder of the Existing Mortgage on the Property. Communication with Eastbridge is critical to the CEMA process. The CEMA cooperation request letter (prepared under separate cover) should be transmitted to Eastbridge as soon as practicable, requesting (a) Eastbridge's agreement to assign the Existing Mortgage, (b) a formal payoff statement reflecting the outstanding balance as of the anticipated closing date, and (c) the execution and delivery of assignment documents in the form acceptable to Pinnacle and Granite State. We will coordinate with the Seller's counsel regarding the most effective channel for communication with Eastbridge and the identity of the appropriate Eastbridge representative to receive the request.
Halcyon Planning Associates LLC — Mark Espinoza. Mr. Espinoza has provided zoning analysis for the Property, confirming its location within a C6-4 zoning district. While Mr. Espinoza has no direct involvement in the transfer tax or MRT analysis, his zoning classification confirmation is relevant to the determination that the commercial RPT rate of 2.625% applies and that the Property is appropriately treated as a commercial mixed-use property for transfer tax purposes.
XI. Next Steps
The following action items should be pursued in connection with the transfer tax and MRT matters addressed in this memorandum. We recommend that all items be initiated promptly to ensure adequate lead time prior to the target closing date of June 30, 2026:
1. Finalize and Transmit CEMA Request Letter to Eastbridge. The draft CEMA cooperation request letter prepared under separate cover should be finalized, approved by the Buyer, and transmitted to Eastbridge Commercial Bank, N.A. as soon as practicable. Given the importance of Eastbridge's cooperation to the realization of $803,600 in potential MRT savings, we recommend that this letter be transmitted no later than the end of March 2026 to allow sufficient time for Eastbridge's internal review and response.
2. Confirm CEMA Structure with Pinnacle. We will coordinate with Daniel Ortega at Pinnacle Federal Savings Bank to confirm that the CEMA structure is acceptable to Pinnacle and to identify any specific requirements or conditions that Pinnacle may impose. This confirmation should be obtained prior to PSA execution (target: April 11, 2026) so that the CEMA provisions in the PSA can be drafted with specificity.
3. Confirm Mansion Tax Non-Applicability. We will coordinate with Laura Siddiqui, CPA, at Edgemont Nash & Co. LLP to confirm our analysis that the NYS mansion tax does not apply to this transaction. Ms. Siddiqui should review the relevant statutory provisions, available TSB-M memoranda, and any recent administrative guidance, and provide a written confirmation or analysis supporting (or, if necessary, qualifying) our conclusion.
4. Incorporate Tax Provisions into Draft PSA. The transfer tax allocation provisions, CEMA cooperation covenants, indemnification provisions, mansion tax contingency language, and tax return filing provisions recommended in Section IX above should be incorporated into the draft PSA. We will prepare initial drafts of these provisions for inclusion in the PSA and will circulate them for review by Angela Fontaine and Margaux Ashworth-Levine prior to submission to the Seller's counsel. Target for PSA execution remains April 11, 2026.
5. Coordinate with Granite State Title Insurance Company on CEMA. We will engage Martin Clearfield at Granite State to review the existing title policy for CEMA compatibility, to identify any title endorsement requirements specific to the CEMA structure, and to ensure that the title commitment for the new owner's and lender's policies reflects the CEMA transaction. This coordination should be initiated promptly so that any title issues can be identified and resolved well in advance of closing.
6. Prepare Draft Transfer Tax Returns. In coordination with Edgemont Nash & Co. LLP and the Seller's counsel, we will prepare drafts of the required transfer tax returns — Form NYC-RPT (New York City Real Property Transfer Tax Return), Form TP-584 (Combined Real Estate Transfer Tax Return), and Form RP-5217 (Real Property Transfer Report) — for review and finalization prior to closing. These returns must be in final form at the time of deed recording and should be circulated in draft to all parties for review no later than two weeks before the scheduled closing date.
7. Monitor Legislative and Regulatory Developments. We will continue to monitor for any legislative proposals, enacted legislation, administrative rulings, or regulatory changes that may affect the applicable transfer tax rates, MRT rates, or mansion tax provisions prior to closing. In particular, we will monitor for any changes to the NYC RPT or NYS RETT rate schedules, any amendments to the mansion tax statute or its application to mixed-use properties, and any changes to the CEMA provisions of New York Tax Law § 255.
XII. Disclaimer and Qualification
This memorandum is based on the provisions of the New York Tax Law, the New York City Administrative Code, and the rules, regulations, and guidance issued by the New York State Department of Taxation and Finance and the New York City Department of Finance, in each case as currently in effect as of the date hereof (March 18, 2026). Tax rates, exemptions, and obligations are subject to change at any time by legislative action, regulatory amendment, or administrative interpretation, and any such change could affect the analysis and conclusions set forth herein. We undertake no obligation to update this memorandum for subsequent developments unless specifically requested to do so.
The dollar amounts set forth in this memorandum are estimates based on the information currently available to us, including the $120,000,000 Purchase Price, the estimated $28,700,000 payoff balance of the Existing Mortgage, and the proposed $78,000,000 mortgage from Pinnacle Federal Savings Bank. Actual tax obligations at closing may differ from the estimates set forth herein if the final consideration, payoff balance, mortgage amount, or other relevant figures differ from the assumptions used in this analysis.
This memorandum does not address the federal income tax implications of the proposed transaction, including but not limited to capital gains taxes, depreciation recapture, passive activity limitations, or any other federal tax matters applicable to the Buyer, the Seller, or their respective members or owners. Federal income tax implications are being analyzed separately by Edgemont Nash & Co. LLP on behalf of the Buyer and are outside the scope of our engagement.
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It has been prepared solely for the use of the addressees and their authorized representatives in connection with the above-referenced transaction. This memorandum should not be disclosed, distributed, or made available to any third party — including, without limitation, the Seller, the Seller's counsel, lenders, brokers, or governmental authorities — without the prior written consent of Calderwood & Harkness LLP.
Please do not hesitate to contact me if you have any questions or would like to discuss any aspect of this analysis.
CALDERWOOD & HARKNESS LLP
By: ________
Cynthia Ho Associate, Real Estate Practice Group Direct: (212) 555-4837
Email: cho@calderwoodharkness.com
cc: File (Matter No. 1026-00003)
| Tax | Amount |
| NYC Real Property Transfer Tax (RPT) | $3,150,000 |
| NYS Real Estate Transfer Tax (RETT) | $780,000 |
| Total Transfer Taxes | $3,930,000 |
| Item | Amount |
| Purchase Price | $120,000,000 |
| Less: Eastbridge Mortgage Payoff (estimated) | ($28,700,000) |
| Less: NYC RPT | ($3,150,000) |
| Less: NYS RETT | ($780,000) |
| Less: Other Customary Closing Costs (estimated) | (to be determined) |
| Estimated Net Proceeds to Seller (before income tax and broker fees) | ~$87,370,000 |
| Item | Amount |
| Purchase Price (Proceeds) | $120,000,000 |
| Less: Estimated Basis (Acquisition Price + Capital Improvements) | ($82,700,000) |
($68,500,000 acquisition + $14,200,000 capital improvements)