PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
FROM: Rafael Dominguez, Associate, Real Estate Department, Calderwood & Harkness LLP
TO: Douglas Fairchild, Partner; Angela Fontaine, Partner; Grace Nakamura, Senior Associate
DATE: March 5, 2025
RE: Review of Ground Lease between NYC Economic Development Corporation (Landlord) and Metropolitan Transit Development Corp. (Tenant) — 450 West 34th Street, New York, New York 10001 (Block 729, Lots 1, 5, 12, 15); Recorded at CRFN 2020000198762 (NYC ACRIS)
CLIENT/MATTER: Metropolitan Transit Development Corp. / C&H Matter No. 1031-00004
This memorandum is a privileged and confidential attorney-client communication and constitutes attorney work product. It is intended solely for the use of the addressees listed above and should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
I. Executive Summary
This memorandum sets forth the results of our review and analysis of the ninety-nine (99) year ground lease (the "Ground Lease") executed as of June 1, 2020, by and between the New York City Economic Development Corporation ("NYCEDC"), as fee owner and landlord, and Metropolitan Transit Development Corp. ("MTDC"), as tenant, covering the real property located at 450 West 34th Street, New York, New York 10001, designated as Manhattan Block 729, Lots 1, 5, 12, and 15 on the Tax Map of the City of New York (the "Premises"). The Ground Lease was recorded in the Office of the City Register of the City of New York at City Register File Number ("CRFN") 2020000198762, as reflected in the records of the Automated City Register Information System ("ACRIS").
This analysis has been undertaken in connection with the proposed financing of the Premises, consisting of (a) a proposed $475,000,000 senior mortgage loan (the "Senior Loan") to be originated by Ironclad National Bank, N.A. ("Ironclad"), acting as Administrative Agent and Lead Lender, with a proposed syndicate including Ridgeline Savings Bank, Atlas Mutual Insurance Company, Commonwealth Trust Company, Harborview Federal Savings Bank, and Meridian Pacific Bank (collectively, the "Senior Lenders"), and (b) a proposed $200,000,000 mezzanine loan (the "Mezzanine Loan") to be originated by Granite Peak Capital Partners, LP ("Granite Peak" and, together with the Senior Lenders, the "Lenders"). The target closing date for both financings is June 15, 2025 (the "Closing Date").
Our review has yielded the following key findings:
(a) Leasehold Mortgage Consent. The Ground Lease requires NYCEDC consent for any leasehold mortgage but contains a negotiated "deemed approval" mechanism pursuant to which NYCEDC's consent is considered granted without affirmative written approval, provided that certain specified conditions are satisfied. As discussed in detail in Section IV below, several of these conditions require careful analysis in the context of the proposed Senior Loan, and at least one condition—the definition of "Institutional Lender"—may not, on its face, encompass the full syndicate of Senior Lenders without supplemental confirmation.
(b) Subletting Provisions. The subletting provisions of the Ground Lease are broadly permissive, reflecting the mixed-use transit-oriented development character of the project. Subletting of individual office, retail, and ancillary transit spaces is permitted without the prior written consent of NYCEDC, subject to compliance with specified notice requirements, permitted use restrictions consistent with the Uniform Land Use Review Procedure ("ULURP") approvals, and certain reporting obligations.
(c) Existing SNDA. An existing Subordination, Non-Disturbance, and Attornment Agreement (the "Existing SNDA") has been identified in the title search materials and is recorded in ACRIS. However, the Existing SNDA must be amended or replaced with a new instrument to address the lender-specific requirements of both Ironclad (on behalf of the Senior Lenders) and Granite Peak. The preparation and negotiation of an amended and restated SNDA is on the critical path to the Closing Date.
(d) Ground Rent and Escalation. The ground rent and CPI-based escalation terms of the Ground Lease are generally consistent with market standards for long-term ground leases on NYCEDC-owned parcels in Manhattan. However, the annual base ground rent of $4,200,000, together with the CPI escalation mechanism (which is subject to a floor but not to a cap), creates a variable expense component that must be carefully modeled into the debt service coverage ratio ("DSCR") and debt yield covenant compliance analysis for the Senior Loan. Notably, the first CPI escalation reset date is June 1, 2025—approximately two weeks before the target Closing Date—requiring immediate attention.
(e) Supplemental Agreements Required Before Closing. Several provisions of the Ground Lease will require negotiation of supplemental agreements before closing, including (i) an amended and restated SNDA, (ii) a landlord consent (or confirmation of deemed approval) for the Senior Loan, (iii) a consent to the assignment of the leasehold interest from MTDC to the to-be-formed special purpose entity ("SPE") structure, and (iv) a ground lease estoppel certificate from NYCEDC.
The following open issues require immediate partner-level attention and engagement with the Lenders and NYCEDC:
• Whether the deemed-approval mechanism for leasehold mortgages is fully satisfied or whether affirmative NYCEDC consent must be obtained for the Senior Loan;
• Whether the mezzanine pledge of membership interests in the to-be-formed borrower entity triggers the Ground Lease's change-of-control or indirect transfer provisions;
• Whether the assignment of the leasehold interest from MTDC to the SPE subsidiary (HYW Mortgage LLC) requires NYCEDC consent;
• The adequacy of the Existing SNDA and the scope of amendments required for the Senior Lenders and Granite Peak; and
• The calculation of the first CPI ground rent escalation and its impact on projected loan covenant compliance.
Each of these issues is discussed in detail in the sections that follow.
II. Description of the Ground Lease
A. Basic Terms
The following is a summary of the basic terms of the Ground Lease:
The Premises consists of four contiguous tax lots aggregating approximately 132,500 square feet of lot area, situated on the west side of Tenth Avenue between West 33rd Street and West 34th Street, within the Hudson Yards Special District. The project contemplated under the Ground Lease is a large-scale, mixed-use transit-oriented development (the "Project") incorporating approximately 2.4 million square feet of above-grade floor area, including Class A commercial office space, ground-floor and below-grade retail space, and ancillary transit infrastructure improvements connecting to the Metropolitan Transportation Authority's No. 7 subway line extension.
The Permitted Use provision in Article 3 of the Ground Lease is expressly tied to the ULURP approvals obtained for the Project. The Ground Lease provides that any material change in the permitted use of the Premises requires the prior written consent of NYCEDC and must be consistent with all applicable zoning and land use approvals. This provision is generally consistent with NYCEDC's standard form ground lease for major development projects and should not present an obstacle to the proposed financing, provided that the Lenders' loan documents do not impose use covenants that conflict with the Ground Lease's permitted use restrictions.
B. Amendments and Supplements
Based on our review of the preliminary title search materials ordered on March 15, 2025 (Sentinel Title & Escrow Company, Commitment No. STN-2025-MH-04178), we have not identified any recorded amendments to the Ground Lease as of the date of this memorandum. MTDC has represented to us, through its in-house counsel Lydia Okafor, that no formal amendments to the Ground Lease have been executed since the date of original recording.
MTDC has disclosed the existence of a side letter dated September 14, 2022, between NYCEDC and MTDC (the "September 2022 Side Letter"), relating to the phasing of construction and the timing of certain milestone obligations under the Ground Lease. We have requested a copy of the September 2022 Side Letter from MTDC and are awaiting receipt. We have also requested confirmation from MTDC as to whether any additional side letters, memoranda of understanding, or informal agreements exist between the parties.
We note that the final title commitment from Sentinel Title has not yet been delivered and is expected by approximately March 25, 2025. This memorandum should be updated and supplemented upon receipt of the final title commitment to reflect any additional encumbrances, exceptions, or instruments identified in the title search that affect the Ground Lease or the leasehold interest.
III. Ground Rent and Escalation Provisions
A. Base Ground Rent
Pursuant to Article 4 of the Ground Lease, MTDC is obligated to pay annual base ground rent to NYCEDC in the amount of Four Million Two Hundred Thousand Dollars ($4,200,000) per annum (the "Base Ground Rent").
The Base Ground Rent is payable in equal quarterly installments of $1,050,000 each, due on the first business day of each calendar quarter (i.e., January 1, April 1, July 1, and October 1 of each year), in advance. Payments are required to be made by wire transfer of immediately available funds to an account designated by NYCEDC at Greaves Bancorp, as specified in Section 4.03 of the Ground Lease. The wire instructions are set forth in Exhibit D to the Ground Lease; MTDC should confirm with NYCEDC that the wire instructions remain current.
The Ground Lease provides for a grace period of ten (10) business days following the due date of each quarterly installment before a late payment is deemed to have occurred. If Base Ground Rent or any installment thereof is not received by NYCEDC within such ten (10) business day grace period, the overdue amount shall bear interest at a default interest rate equal to the lesser of (x) the prime rate published by The Wall Street Journal on the date such payment was originally due plus four percent (4%) per annum, or (y) the maximum rate permitted by applicable law. In addition, any late payment is subject to a late charge equal to five percent (5%) of the overdue amount, which the Ground Lease states is intended as a reasonable estimate of the administrative costs incurred by NYCEDC and not as a penalty.
We note that the combination of default interest and a five percent (5%) late charge is aggressive but within the range of market terms for NYCEDC ground leases. These provisions should be disclosed to the Lenders, as a default under the Ground Lease resulting from a failure to pay ground rent could trigger cross-default provisions in the loan documents and, ultimately, jeopardize the leasehold estate securing the Senior Loan.
B. CPI Escalation Mechanism
Article 4, Section 4.05 of the Ground Lease provides for periodic escalation of the Base Ground Rent based on changes in the Consumer Price Index for All Urban Consumers (CPI-U), as published by the Bureau of Labor Statistics of the United States Department of Labor, for the New York-Newark-Jersey City, NY-NJ-PA Combined Statistical Area (the "CPI Index").
The key parameters of the escalation mechanism are as follows:
(i) Escalation Frequency. The Base Ground Rent is subject to adjustment every five (5) years from the date of Ground Lease commencement. Accordingly, the escalation reset dates are June 1, 2025; June 1, 2030; June 1, 2035; and every five (5) years thereafter throughout the term of the Ground Lease.
(ii) Base Period. The "Base CPI" is defined as the CPI Index for the month of May 2020, which corresponds to the month immediately preceding the commencement date of the Ground Lease.
(iii) Comparison Period. On each escalation reset date, the "Comparison CPI" is defined as the CPI Index for the month of May of the year in which the applicable escalation reset date occurs. For example, for the first reset date of June 1, 2025, the Comparison CPI will be the CPI Index for May 2025.
(iv) Escalation Formula. The adjusted Base Ground Rent for each successive five-year period is calculated on a cumulative basis from the base year, not on a compounded basis or as a percentage increase over the immediately preceding five-year period. Specifically, the formula provides:
Adjusted Base Ground Rent = Initial Base Ground Rent × (Comparison CPI ÷ Base CPI)
This is a standard "straight CPI" formula that resets the ground rent to reflect the total cumulative change in the CPI Index from the original base period. This approach avoids the compounding effect that would result from applying successive percentage increases to already-escalated rent.
(v) Floor. The Ground Lease provides that in no event shall the Base Ground Rent, as adjusted pursuant to the CPI escalation mechanism, be less than the Base Ground Rent payable during the immediately preceding five-year period. In other words, there is a floor that prevents any downward adjustment in the event of deflation.
(vi) Cap. Notably, the Ground Lease does not contain a cap or ceiling on the CPI escalation. This means that in a high-inflation environment, the Base Ground Rent could increase without limit (subject only to the cumulative CPI formula). This uncapped escalation creates a variable expense risk that must be factored into the Lenders' underwriting models. In a sustained high-inflation scenario, the ground rent could materially erode the property's net operating income ("NOI") and affect DSCR and debt yield covenant compliance under the loan documents.
First Escalation Date — June 1, 2025. Of particular significance to the proposed financing, the first CPI escalation reset date is June 1, 2025, which falls approximately two weeks before the target Closing Date of June 15, 2025. This means that the adjusted Base Ground Rent will be in effect as of the Closing Date, and the Lenders will need to underwrite the loan based on the adjusted (rather than the initial) Base Ground Rent.
As of the date of this memorandum, the most recently published CPI-U for the New York-Newark-Jersey City area is for January 2025. Based on available CPI data, we have prepared the following illustrative calculation:
• Base CPI (May 2020): 256.394 (CPI-U, New York-Newark-Jersey City)
• Most Recent Available CPI (January 2025): 303.218 (CPI-U, New York-Newark-Jersey City)
• Estimated Comparison CPI (May 2025): Assuming approximately 0.3% monthly increase through May 2025, estimated at approximately 306.9 (this is an estimate only and will be confirmed upon publication of the May 2025 CPI data in mid-June 2025)
• Estimated Adjusted Base Ground Rent:
$4,200,000 × (306.9 ÷ 256.394) = approximately $5,027,000 per annum
• Estimated Increase: approximately $827,000 per annum, or approximately 19.7% cumulative over the initial five-year period.
We caution that this calculation is illustrative only and is based on estimated CPI data. The actual adjusted Base Ground Rent will not be determinable until the Bureau of Labor Statistics publishes the May 2025 CPI-U data for the New York-Newark-Jersey City area, which is typically released in mid-June. This creates an inherent timing uncertainty, as the Closing Date may precede publication of the relevant CPI figure. We recommend discussing with MTDC and the Lenders how this timing gap should be addressed—for example, through an escrow or true-up mechanism in the loan documents.
We further recommend coordinating with Whitfield Albrecht LLP (Sandra Okonkwo) to confirm that MTDC's financial projections for the Project are consistent with the estimated adjusted ground rent, and that the Broadstreet Appraisal (File No. BAG-25-1092, delivery expected April 1, 2025) incorporates appropriate ground rent escalation assumptions in its valuation analysis.
C. Additional Rent and Impositions
In addition to the Base Ground Rent, the Ground Lease requires MTDC, as tenant, to pay as "Additional Rent" all of the following:
(a) Real Estate Taxes and Assessments. Pursuant to Article 5 of the Ground Lease, MTDC is responsible for the payment of all real estate taxes, assessments (including special assessments and business improvement district assessments), water charges, sewer charges, and other governmental impositions levied or assessed against the Premises or any improvements thereon (collectively, "Impositions"). MTDC is required to pay all Impositions directly to the applicable governmental authority and to furnish evidence of payment to NYCEDC within thirty (30) days after the due date of each Imposition.
(b) Insurance Costs. MTDC is required to maintain, at its sole cost and expense, the insurance coverages specified in Article 11 of the Ground Lease, including commercial general liability, property (all-risk), builder's risk (during construction), and umbrella/excess liability policies in amounts and with coverages specified therein. The costs of such insurance are treated as Additional Rent.
(c) Other Charges. Any other amounts payable by MTDC to NYCEDC or to third parties under the Ground Lease, including charges for NYCEDC review of plans, consent fees, and any amounts payable under any supplemental agreements.
PILOT Agreement. We note that certain NYCEDC ground leases for development projects in the Hudson Yards Special District are accompanied by Payment in Lieu of Taxes ("PILOT") agreements or other tax incentive arrangements. We have not identified a PILOT agreement associated with this Ground Lease in the title search materials or in the documents provided by MTDC to date. We recommend confirming with MTDC and NYCEDC whether a PILOT agreement or any other tax exemption or abatement arrangement exists or is contemplated for the Project. If a PILOT agreement is in place, the terms thereof will be directly relevant to the Lenders' underwriting of the property's operating expenses and NOI. We flag this as an open item for further investigation.
D. Impact on Loan Covenants
The ground rent payable under the Ground Lease constitutes a senior obligation that must be satisfied before debt service on the Senior Loan. Accordingly, the annual ground rent (as adjusted pursuant to the CPI escalation mechanism) must be treated as an operating expense in calculating the property's NOI for purposes of the DSCR and debt yield covenants in the Senior Loan documents.
Based on the Ironclad term sheet dated February 28, 2025, the Senior Loan contains the following financial covenants:
• Combined DSCR Covenant: minimum 1.20x (tested quarterly on a trailing twelve-month basis)
• Combined Debt Yield Covenant: minimum 8.0% (tested quarterly on a trailing twelve-month basis)
Assuming a stabilized Year 3 NOI of $58,200,000 (as projected by MTDC), the impact of ground rent on these covenants is as follows:
• NOI after Ground Rent (at initial Base Ground Rent of $4,200,000): $54,000,000
• NOI after Ground Rent (at estimated adjusted Base Ground Rent of $5,027,000): $53,173,000
• Combined Annual Debt Service (Senior Loan at estimated blended rate of 6.15% on $475,000,000, interest-only): approximately $29,212,500
• DSCR (at initial Ground Rent): $54,000,000 ÷ $29,212,500 = 1.85x (satisfies 1.20x covenant)
• DSCR (at estimated adjusted Ground Rent): $53,173,000 ÷ $29,212,500 = 1.82x (satisfies 1.20x covenant)
• Combined Debt Yield (at initial Ground Rent): $54,000,000 ÷ $675,000,000 = 8.0% (at threshold)
• Combined Debt Yield (at estimated adjusted Ground Rent): $53,173,000 ÷ $675,000,000 = 7.88% (below 8.0% threshold)
The combined debt yield calculation is potentially problematic. If the combined debt yield is calculated against the total combined loan amount of $675,000,000 (Senior Loan plus Mezzanine Loan) and NOI is reduced by the estimated adjusted ground rent, the resulting debt yield of approximately 7.88% would fall below the 8.0% minimum covenant level. We recommend the following:
1. Confirm with Ironclad how the debt yield covenant is calculated—specifically, whether it is calculated against the Senior Loan only ($475,000,000) or the combined loan amount ($675,000,000), and whether ground rent is deducted from NOI or treated separately.
2. Recommend that the loan documents define "Net Operating Income" to deduct ground rent as an operating expense above the debt service line, to ensure consistency in covenant testing.
3. Coordinate with Whitfield Albrecht to confirm that MTDC's stabilized NOI projections adequately account for the CPI-adjusted ground rent effective June 1, 2025.
IV. Leasehold Mortgage Consent Provisions
A. General Mortgage Restriction
Article 8 of the Ground Lease ("Encumbrances") governs the creation of liens and security interests on the leasehold estate. Section 8.01 provides, as a general rule, that MTDC shall not mortgage, pledge, encumber, or otherwise hypothecate its leasehold interest in the Premises, or any portion thereof, without the prior written consent of NYCEDC. This is a standard restriction found in virtually all NYCEDC ground leases and reflects the public entity's interest in maintaining oversight of the financial obligations burdening the leasehold estate on publicly owned land.
The restriction in Section 8.01 applies broadly to "any mortgage, deed of trust, security interest, assignment of rents and leases, or other encumbrance of any nature whatsoever" affecting the leasehold interest. The restriction does not, by its terms, distinguish between first-priority mortgages and subordinate or junior liens, nor does it set a dollar threshold below which consent is not required. Accordingly, even a de minimis mortgage or security interest would technically require NYCEDC consent under the literal language of Section 8.01.
B. Deemed Approval / Pre-Approved Mortgage Conditions
Section 8.02 of the Ground Lease provides an important exception to the general mortgage restriction: the "deemed approval" mechanism. Under Section 8.02, NYCEDC's consent to a leasehold mortgage is deemed granted without the necessity of affirmative written approval if all of the following conditions are satisfied:
(a) Institutional Lender Requirement. The proposed leasehold mortgage must be held by or on behalf of an "Institutional Lender," which is defined in the Ground Lease (Section 1.01) as:
"a bank, savings bank, savings and loan association, trust company, insurance company, pension fund, real estate investment trust, investment company, or any other financial institution or entity that is regularly engaged in the business of making or holding commercial real estate loans, provided that such entity (or, in the case of a loan held by an agent on behalf of a group of lenders, the agent) has assets in excess of Five Hundred Million Dollars ($500,000,000)."
This definition raises several questions in the context of the proposed Senior Loan:
• Ironclad as Administrative Agent. Ironclad National Bank, N.A. is a national banking association with total assets in excess of $185 billion and is unquestionably an "Institutional Lender" within the meaning of the Ground Lease. The key question is whether the definition encompasses the Senior Loan as structured—i.e., a syndicated loan held by Ironclad as Administrative Agent "on behalf of a group of lenders."
• Syndicate Members. The proposed syndicate includes Ridgeline Savings Bank, Atlas Mutual Insurance Company, Commonwealth Trust Company, Harborview Federal Savings Bank, and Meridian Pacific Bank. Each of these entities appears to fall within the categories enumerated in the definition (bank, savings bank, insurance company, trust company), but we must confirm that each co-lender independently satisfies the $500,000,000 asset threshold. We have requested asset verification from Ironclad's counsel, Velmoran & Frost LLP (Allison Marquez), and expect to receive confirmation by March 15, 2025. If any co-lender does not satisfy the asset threshold, a question arises as to whether the deemed-approval mechanism is satisfied if the loan is held by Ironclad as agent but participated to a lender that does not independently qualify.
• Future Assignees and Participants. The deemed-approval mechanism does not expressly address future assignments or participations of the leasehold mortgage. If the Senior Loan is assigned or participated to entities that do not qualify as "Institutional Lenders," the continued applicability of the deemed approval could be called into question. We recommend negotiating with NYCEDC for a provision in the SNDA (or a separate consent letter) confirming that the deemed-approval mechanism is not retroactively vitiated by future assignments or participations, so long as the agent continues to qualify.
(b) Loan-to-Value Limitation. The proposed leasehold mortgage must not secure indebtedness in excess of seventy-five percent (75%) of the then-current appraised fair market value of the leasehold interest (including the value of improvements constructed or to be constructed on the Premises). The appraised value must be determined by an independent MAI-certified appraiser selected by the tenant and reasonably acceptable to NYCEDC.
The Broadstreet Appraisal (File No. BAG-25-1092) has been commissioned and is expected to be delivered on or about April 1, 2025. We do not yet have the appraised value. However, based on MTDC's internal projections and comparable transactions, we understand that the anticipated appraised value of the leasehold interest is in the range of $900,000,000 to $1,050,000,000. At the midpoint of this range ($975,000,000), the $475,000,000 Senior Loan would represent a loan-to-value ratio of approximately 48.7%, well within the 75% threshold. Even at the low end of the range ($900,000,000), the loan-to-value ratio would be approximately 52.8%, still comfortably below 75%.
However, we note a potential issue: the definition of "indebtedness" in Section 8.02(b) is not entirely clear as to whether it encompasses only the leasehold mortgage (i.e., the Senior Loan) or the aggregate of all indebtedness secured directly or indirectly by the leasehold interest. If the Mezzanine Loan is considered to be "indebtedness" secured by the leasehold interest (even though it is technically secured by a pledge of membership interests), the combined indebtedness of $675,000,000 against an appraised value of $975,000,000 would yield a ratio of approximately 69.2%, still below 75% but with less margin. We recommend seeking clarification from NYCEDC on this point.
(c) Mortgage Term. The term of the proposed leasehold mortgage must not extend beyond the remaining term of the Ground Lease. The remaining Ground Lease term as of the Closing Date is approximately ninety-four (94) years. The Senior Loan has an initial maturity date of June 15, 2029 (approximately four years from closing), with two one-year extension options extending the maturity to June 15, 2031 (approximately six years from closing). Both the initial maturity and the fully extended maturity are well within the remaining ninety-four-year Ground Lease term. This condition is clearly satisfied.
(d) Post-Closing Document Delivery. MTDC is required to deliver to NYCEDC complete copies of the leasehold mortgage and all related loan documents within thirty (30) days following the closing of the leasehold mortgage loan. This is an administrative requirement that should not present any obstacle, provided that MTDC's counsel calendars the delivery deadline.
Analysis: Deemed-Approval Satisfaction. Based on our preliminary analysis, the proposed $475,000,000 Senior Loan appears to satisfy conditions (c) and (d) without difficulty. Condition (b) is likely satisfied, subject to confirmation of the appraised value and clarification of whether the Mezzanine Loan is included in the "indebtedness" calculation. Condition (a) is substantially satisfied with respect to Ironclad as Administrative Agent but requires confirmation that each syndicate member independently meets the $500,000,000 asset threshold and that the "on behalf of a group of lenders" language in the definition adequately covers the syndicated loan structure.
We recommend that, in parallel with our analysis of the deemed-approval mechanism, we prepare and submit an NYCEDC consent request as a precautionary measure, so that the timeline for affirmative consent is not lost if the deemed-approval conditions are ultimately determined not to be fully satisfied.
C. Affirmative Consent Requirement — Process and Timeline
In the event that the deemed-approval conditions set forth in Section 8.02 are not fully satisfied, or if NYCEDC takes the position that affirmative consent is required notwithstanding the deemed-approval mechanism, Section 8.03 of the Ground Lease sets forth the process for obtaining NYCEDC's affirmative written consent to a leasehold mortgage:
(i) Consent Request Submission. MTDC must submit a written consent request to NYCEDC, together with (A) a description of the proposed leasehold mortgage, including the identity of the mortgagee, the principal amount, the interest rate, the maturity date, and the amortization schedule (if any); (B) the most recent financial statements of MTDC (audited, if available); (C) a copy of the proposed form of mortgage and related loan documents (or, if not yet finalized, a term sheet or commitment letter); and (D) evidence that the proposed mortgagee qualifies as an Institutional Lender.
(ii) NYCEDC Review Period. NYCEDC has a review period of sixty (60) days following receipt of a complete consent request, together with all required supporting materials. If NYCEDC fails to respond within such sixty (60) day period, the consent is deemed granted (a "silence-is-consent" provision). This is a helpful provision, but we should not rely on it; experience with NYCEDC suggests that the agency's real estate counsel will respond within the review period, often with requests for supplemental information that may restart the review clock.
(iii) Reasonableness Standard. Section 8.03 provides that NYCEDC's consent "shall not be unreasonably withheld, conditioned, or delayed." Under New York law, this standard is enforceable in the context of commercial ground leases, and a landlord's unreasonable withholding of consent may give rise to an action for declaratory judgment or specific performance. See Krieger v. Helmsley-Spear, Inc., 62 N.Y.2d 539 (1984); American Book Co. v. Yeshiva University Dev. Found., 297 A.D.2d 544 (1st Dep't 2002). However, litigation to compel consent would be impractical given the financing timeline.
(iv) Consent Fee. The Ground Lease provides that MTDC shall reimburse NYCEDC for its reasonable out-of-pocket legal fees and expenses incurred in connection with the review of the consent request, up to a maximum of $50,000 per request. This is a customary provision.
Timeline Analysis. Working backward from the target Closing Date of June 15, 2025, and assuming a sixty (60) day NYCEDC review period, a consent request must be submitted no later than April 15, 2025 to allow for timely processing. In practice, we recommend submitting the request as early as possible—ideally by April 1, 2025—to provide a buffer for supplemental information requests, internal NYCEDC review processes, and any negotiation of consent conditions. This is a critical path item.
D. Mezzanine Loan Considerations
The proposed Mezzanine Loan from Granite Peak ($200,000,000) will be secured by a pledge of one hundred percent (100%) of the membership interests in HYW Mortgage LLC, the to-be-formed Delaware limited liability company that will serve as the mortgage borrower and ground lessee under the Ground Lease. The Mezzanine Loan will not be secured by a direct mortgage or lien on the leasehold interest itself. This is a standard mezzanine loan structure in commercial real estate finance.
The threshold question is whether the Mezzanine Loan triggers the leasehold mortgage consent provisions of Article 8 of the Ground Lease. We analyze this question under two provisions:
(a) Leasehold Mortgage Consent (Section 8.01). The restriction in Section 8.01 applies to the creation of any "mortgage, deed of trust, security interest, assignment of rents and leases, or other encumbrance of any nature whatsoever" on the leasehold interest. A pledge of membership interests in the entity holding the leasehold interest is not a direct encumbrance on the leasehold itself; rather, it is a security interest in personal property (the membership interests in HYW Mortgage LLC). Under prevailing New York law and UCC principles, a pledge of equity interests in a real estate holding entity is treated as a personal property security interest and is perfected under Article 9 of the UCC, not by recording in the real property records. Accordingly, the Mezzanine Loan should not, by its terms, constitute a "mortgage" or "encumbrance" on the leasehold interest within the meaning of Section 8.01.
However, we note that the language "other encumbrance of any nature whatsoever" in Section 8.01 is broad and could arguably be construed to encompass indirect encumbrances, including a pledge of equity interests in the tenant entity. While we believe the stronger argument is that the mezzanine pledge does not trigger Section 8.01, this is not free from doubt, and NYCEDC could take a contrary position.
(b) Change of Control (Section 9.04). Of greater concern is Section 9.04 of the Ground Lease, the "Change of Control" provision, which provides that any "Transfer" (as defined in Section 9.01) that results in a change in the "Control" (as defined in Section 9.01) of the tenant entity shall be treated as an assignment of the Ground Lease requiring NYCEDC consent. "Transfer" is defined broadly to include "any sale, assignment, transfer, pledge, hypothecation, encumbrance, or other disposition, directly or indirectly, voluntarily or involuntarily, of any direct or indirect ownership interest in Tenant." "Control" is defined as "the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of Tenant."
A pledge of one hundred percent of the membership interests in HYW Mortgage LLC to Granite Peak, while not itself a transfer of control, creates the mechanism by which Granite Peak could acquire control upon a foreclosure of the mezzanine pledge. The foreclosure by Granite Peak on the membership interests in HYW Mortgage LLC would result in a transfer of ownership of the tenant entity from HYW Mezzanine LLC (the current sole member) to Granite Peak (or its designee), which would almost certainly constitute a "Change of Control" under Section 9.04.
Two sub-issues arise:
• First, whether the creation of the mezzanine pledge itself (as opposed to the exercise of remedies thereunder) constitutes a "Transfer" triggering Section 9.04. The definition of "Transfer" includes a "pledge" or "hypothecation" of ownership interests, which suggests that the creation of the mezzanine pledge could be deemed a "Transfer" even absent a foreclosure. If so, NYCEDC consent would be required at the time the Mezzanine Loan closes.
• Second, whether the foreclosure on the mezzanine pledge by Granite Peak would trigger a default under the Ground Lease absent NYCEDC consent. If the Ground Lease treats an unconsented Change of Control as a default, the Mezzanine Loan structure creates a latent risk: Granite Peak's exercise of its primary remedy (foreclosure on the equity interests) could simultaneously trigger a Ground Lease default, potentially resulting in termination of the Ground Lease and destruction of the very collateral securing both loans.
This issue requires careful analysis and, in our view, necessitates either (i) obtaining NYCEDC's consent to the mezzanine pledge structure at or prior to closing, or (ii) negotiating an amendment to the Ground Lease (or a provision in the amended SNDA) that expressly permits the creation of the mezzanine pledge and the exercise of foreclosure remedies thereunder, subject to reasonable conditions (e.g., the foreclosure purchaser qualifies as an Institutional Lender or successor to MTDC and agrees to be bound by the Ground Lease). We flag this as a high-priority issue for partner-level discussion with both Lenders and with NYCEDC through Hargrove & Linden, P.C. (Raymond Cho).
We also note that HYW Mortgage LLC and HYW Mezzanine LLC are both to-be-formed Delaware limited liability companies. The Ground Lease, as currently drafted, names MTDC as tenant. The assignment of the leasehold interest from MTDC to HYW Mortgage LLC will itself require either NYCEDC consent or qualification as a permitted assignment (discussed in Section V below). The formation of these SPEs, the assignment of the leasehold, and the creation of the mezzanine pledge should ideally be addressed in a single comprehensive consent request to NYCEDC to avoid piecemeal negotiations.
V. Assignment and Transfer Restrictions
A. Permitted Assignments
Article 9 of the Ground Lease governs the assignment, transfer, and subletting of the leasehold interest. Section 9.02 provides the general restriction: MTDC shall not assign, transfer, or otherwise dispose of the Ground Lease or the leasehold interest created thereby without the prior written consent of NYCEDC. However, Section 9.03 identifies the following categories of permitted assignments that do not require NYCEDC's prior written consent:
(a) Affiliate Transfers. An assignment of the Ground Lease to an entity that is an "Affiliate" of MTDC, provided that (i) MTDC (or the ultimate parent entity of MTDC) retains a direct or indirect controlling interest in the assignee, (ii) the assignee assumes all obligations of the tenant under the Ground Lease pursuant to a written assumption agreement in form reasonably satisfactory to NYCEDC, (iii) MTDC delivers written notice to NYCEDC at least thirty (30) days prior to the effective date of the assignment, together with a copy of the assignment and assumption agreement and such organizational and financial information regarding the assignee as NYCEDC may reasonably require, and (iv) MTDC remains jointly and severally liable for all obligations of the tenant under the Ground Lease (or delivers a guaranty from an entity acceptable to NYCEDC). "Affiliate" is defined in Section 1.01 as any entity that directly or indirectly controls, is controlled by, or is under common control with MTDC.
(b) Foreclosure Transfers. An assignment of the Ground Lease to (i) a leasehold mortgagee (or its designee) that acquires the leasehold interest through foreclosure of a permitted leasehold mortgage or by acceptance of a deed or assignment in lieu of foreclosure, or (ii) a bona fide third-party purchaser at a foreclosure sale conducted by a permitted leasehold mortgagee, provided in each case that the assignee assumes all obligations of the tenant under the Ground Lease and satisfies the net worth and financial responsibility standards set forth in the SNDA or such other criteria as NYCEDC may reasonably establish.
(c) Transfers Required by Governmental Authority. An assignment required by any governmental authority in connection with the exercise of eminent domain or condemnation powers.
Analysis of Proposed SPE Assignment. The proposed transaction structure contemplates the assignment of the leasehold interest from MTDC to HYW Mortgage LLC, a to-be-formed Delaware limited liability company that will be a wholly owned subsidiary of HYW Mezzanine LLC, which in turn will be a wholly owned subsidiary of MTDC. The question is whether this assignment qualifies as a permitted affiliate transfer under Section 9.03(a).
On its face, HYW Mortgage LLC would appear to qualify as an "Affiliate" of MTDC, because it will be an entity that is indirectly controlled by MTDC. However, the conditions in Section 9.03(a) require that (i) MTDC retain a direct or indirect controlling interest in the assignee, (ii) the assignee execute a written assumption agreement, (iii) MTDC provide thirty (30) days' prior notice to NYCEDC, and (iv) MTDC remain jointly and severally liable for all Ground Lease obligations or deliver an acceptable guaranty. The joint and several liability requirement in condition (iv) may conflict with the SPE separateness covenants that will be required by the Senior Lenders, which typically prohibit the SPE borrower from having any liabilities other than those arising under the loan documents and the Ground Lease.
Accordingly, we recommend treating the SPE assignment as requiring NYCEDC consent (or, at a minimum, confirming with NYCEDC that the affiliate transfer carve-out applies and negotiating the joint and several liability requirement). This consent request should be combined with the leasehold mortgage consent request discussed in Section IV.C above.
B. Change of Control
As discussed in Section IV.D above, Section 9.04 of the Ground Lease contains a broad change-of-control provision that captures any "Transfer" (including any pledge or hypothecation) of direct or indirect ownership interests in the tenant entity that results in or could result in a change of "Control."
The proposed mezzanine pledge structure raises the question of whether a foreclosure by Granite Peak on the membership interests of HYW Mezzanine LLC in HYW Mortgage LLC would constitute a "Change of Control" under the Ground Lease. We believe that such a foreclosure would clearly result in a Change of Control: the ownership of HYW Mortgage LLC (the tenant under the Ground Lease) would pass from HYW Mezzanine LLC (an MTDC subsidiary) to Granite Peak (or its designee), and the power to direct the management and policies of HYW Mortgage LLC would shift accordingly.
Under Section 9.04, an unconsented Change of Control constitutes an event of default under the Ground Lease, entitling NYCEDC to exercise its remedies under Article 12, including termination of the Ground Lease upon notice and expiration of applicable cure periods. The termination of the Ground Lease upon a mezzanine foreclosure would be a catastrophic outcome for both Lenders, as it would extinguish the leasehold estate that secures the Senior Loan and render the mezzanine collateral worthless.
To mitigate this risk, we recommend that the amended SNDA include an express carve-out from the Change of Control provision for foreclosures (or transfers in lieu of foreclosure) by Granite Peak (or any successor mezzanine lender), subject to the successor entity satisfying specified financial and operational qualifications and assuming the tenant's obligations under the Ground Lease. This will require negotiation with NYCEDC and is discussed further in Section VII.C below.
VI. Subletting Provisions
A. Permitted Subletting
Article 10 of the Ground Lease governs subletting. Section 10.01 provides that MTDC may sublet all or any portion of the Premises for uses consistent with the Permitted Use (as defined in Article 3) without the prior written consent of NYCEDC, subject to the following conditions:
(a) The sublease must be for a use that is consistent with the Permitted Use of the Premises under the Ground Lease and with all applicable ULURP approvals (Application No. C 230415 ZSM, including the commercial office, retail, and ancillary transit infrastructure uses approved by the CPC on September 12, 2023, and the City Council on October 25, 2023).
(b) The term of any sublease must not extend beyond the then-remaining term of the Ground Lease. No sublease may contain an option to renew or extend the sublease term beyond the Ground Lease expiration date (May 31, 2119).
(c) The sublease must be on commercially reasonable terms and at commercially reasonable rental rates. NYCEDC retains the right to review sublease terms and to object (on a reasonable basis) to any sublease that, in NYCEDC's reasonable judgment, contains terms that are materially adverse to the value of the fee interest or the Project.
(d) MTDC remains fully liable for all obligations under the Ground Lease notwithstanding any subletting.
(e) No subletting shall relieve MTDC of its obligation to pay Base Ground Rent and Additional Rent or to comply with all other terms of the Ground Lease.
The subletting provisions are broadly permissive and reflect the intent of the parties that MTDC will sublease individual floors and retail units within the mixed-use development to commercial office tenants, retail operators, and transit-related businesses in the ordinary course of operation. This is consistent with the nature of the Project as a large-scale, multi-tenant development.
The ULURP approvals for the Project permit the following uses on the Premises: commercial offices (Use Group 6B), retail establishments (Use Group 6A), eating and drinking establishments (Use Group 6A), transit infrastructure and related public amenities, and accessory uses customarily associated with the foregoing. The subletting provisions of the Ground Lease should be reviewed against these use categories to confirm that any sublease entered into by MTDC (or its SPE subsidiary) is consistent with both the Ground Lease and the ULURP approvals.
B. Notice and Reporting Requirements
Section 10.02 of the Ground Lease requires MTDC to provide the following notices and reports to NYCEDC in connection with subletting:
(a) Sublease Copies. MTDC shall deliver to NYCEDC a true and complete copy of each sublease (and any amendment, modification, or extension thereof) within thirty (30) days following execution.
(b) Annual Rent Roll. MTDC shall deliver to NYCEDC, no later than January 31 of each calendar year, a certified rent roll as of December 31 of the preceding year, listing all subleases then in effect, the identity of each subtenant, the premises subleased, the annual base rent and any additional rent payable thereunder, the term and expiration date of each sublease, and the current occupancy status of each subleased space.
(c) Occupancy Reports. MTDC shall deliver to NYCEDC, within sixty (60) days following the end of each calendar quarter, a summary of the occupancy rate of the Project, including the total rentable area, the total leased area, the total occupied area, and the total vacancy rate.
These reporting obligations are relatively standard for NYCEDC ground leases and should not present any burden on the borrower. However, the Senior Loan documents will likely contain their own reporting requirements (rent rolls, occupancy reports, financial statements), and the borrower should be made aware of the need to comply with both sets of obligations.
C. Impact on Lender Requirements
Both Ironclad and Granite Peak will require that all subleases at the Premises be subordinate to the leasehold mortgage (or, at a minimum, subject to subordination, non-disturbance, and attornment agreements between the leasehold mortgagee and each subtenant).
We have reviewed the Ground Lease and confirm the following:
(a) The Ground Lease does not prohibit the subordination of subleases to a leasehold mortgage. Section 10.03 provides that MTDC may include subordination provisions in its subleases and may require subtenants to execute subordination and attornment agreements in favor of any permitted leasehold mortgagee.
(b) The Ground Lease permits the assignment of sublease rents as collateral to a permitted leasehold mortgagee. Section 10.04 expressly provides that MTDC may assign its right, title, and interest in and to all rents, income, and other sums payable under the subleases as additional security for a permitted leasehold mortgage, provided that such assignment is subject to and does not diminish MTDC's obligation to pay Base Ground Rent and Additional Rent under the Ground Lease.
These provisions are favorable for the proposed financing and should satisfy the Lenders' requirements with respect to the sublease structure. We will confirm this with Ironclad's counsel during the loan document negotiation process.
VII. Existing SNDA — Review and Required Amendments
A. Description of Existing SNDA
Our title search has identified an existing Subordination, Non-Disturbance, and Attornment Agreement (the "Existing SNDA") recorded in the Office of the City Register of the City of New York at CRFN 2021000056473 (ACRIS). The Existing SNDA was executed on March 15, 2021, by and among:
• NYCEDC, as landlord and fee owner;
• MTDC, as tenant; and
• Sentinel Institutional Lending Group, a division of Sentinel National Bank, as the recognized leasehold mortgagee (the "Original Lender").
Based on our review, the Existing SNDA was executed in connection with a prior construction loan for the initial phases of development on the Premises. We understand from MTDC that the construction loan from Sentinel Institutional Lending Group was repaid in full in December 2023, and the leasehold mortgage securing that loan was discharged and released of record (the satisfaction and discharge instrument was recorded at CRFN 2024000012845). Notwithstanding the discharge of the underlying construction loan, the Existing SNDA appears to remain of record and has not been formally terminated.
The Existing SNDA specifically names Sentinel Institutional Lending Group as the recognized leasehold mortgagee. It does not contain a "successors and assigns" provision that would automatically extend its protections to a subsequent lender such as Ironclad. Accordingly, the Existing SNDA cannot be relied upon by the Senior Lenders or by Granite Peak in the proposed financing, and a new or amended SNDA will be required.
B. Key Provisions of Existing SNDA
Notwithstanding the need for an amended or replacement SNDA, the Existing SNDA provides a useful baseline for understanding the protections that NYCEDC has previously agreed to extend to a leasehold mortgagee. The key provisions of the Existing SNDA are as follows:
Subordination. Section 2 of the Existing SNDA provides that the Ground Lease is and shall remain subordinate and subject to any fee mortgage now or hereafter encumbering the fee interest of NYCEDC in the Premises. This provision confirms the standard hierarchy: the fee interest and any fee mortgage are senior to the leasehold estate. The Existing SNDA further provides that, notwithstanding such subordination, the leasehold estate and the tenant's possessory rights shall not be disturbed so long as the tenant is not in default under the Ground Lease (beyond applicable notice and cure periods).
Non-Disturbance. Section 3 provides that NYCEDC covenants and agrees that, so long as the tenant is not in default under the Ground Lease (after the giving of required notice and the expiration of applicable cure periods, including the additional cure periods afforded to the leasehold mortgagee), NYCEDC shall not disturb the tenant's quiet enjoyment and peaceable possession of the Premises, and the Ground Lease shall not be terminated, modified, or affected by any foreclosure of a fee mortgage, any sale in lieu of foreclosure, or any other transfer of the fee interest.
Attornment. Section 4 provides that the tenant agrees that, in the event of a transfer of the fee interest (whether by foreclosure, deed in lieu, or otherwise), the tenant shall recognize and attorn to the transferee as landlord under the Ground Lease for the then-remaining term thereof, upon the same terms and conditions as set forth in the Ground Lease, and the Ground Lease shall continue in full force and effect as a direct lease between the tenant and the successor landlord.
Lender Protections. Sections 5 through 9 of the Existing SNDA contain the following protections for the recognized leasehold mortgagee:
(i) Copies of Default Notices. NYCEDC agrees to deliver to the recognized leasehold mortgagee, simultaneously with delivery to the tenant, a copy of any notice of default or notice of termination issued under the Ground Lease. No such notice shall be effective against the leasehold mortgagee unless and until it is delivered to the leasehold mortgagee at the address specified in the SNDA.
(ii) Additional Cure Periods. The leasehold mortgagee is afforded the following additional cure periods beyond the cure periods available to the tenant:
• For monetary defaults: an additional fifteen (15) days beyond the expiration of the tenant's cure period (which, as noted in Section III.A above, is ten (10) business days for Base Ground Rent).
• For non-monetary defaults: an additional sixty (60) days beyond the expiration of the tenant's cure period, provided that if the default is of a nature that cannot be cured within such sixty (60) day period, the leasehold mortgagee shall have such additional time as is reasonably necessary to effectuate a cure, so long as the leasehold mortgagee has commenced curative action within the initial sixty (60) day period and is diligently prosecuting the same to completion.
(iii) Right to Enter and Cure. The leasehold mortgagee is entitled to enter the Premises for the purpose of curing any default under the Ground Lease, and NYCEDC shall permit such entry.
(iv) New Lease Obligation. If the Ground Lease is terminated for any reason (including, without limitation, a rejection in bankruptcy, a surrender, or a termination for tenant default), NYCEDC agrees, upon written request from the leasehold mortgagee delivered within ninety (90) days following the effective date of termination, to enter into a new ground lease with the leasehold mortgagee (or its designee) covering the Premises, for the then-remaining term of the Ground Lease, upon substantially the same terms and conditions as the Ground Lease (the "New Lease"). The New Lease shall have priority over any lien, encumbrance, or interest created by NYCEDC after the date of the Ground Lease. The leasehold mortgagee (or its designee) shall, as a condition to the New Lease, cure all monetary defaults then existing under the Ground Lease and shall agree to cure non-monetary defaults to the extent reasonably susceptible of cure by the leasehold mortgagee (or its designee).
(v) Recognition of Foreclosure. NYCEDC recognizes the right of the leasehold mortgagee to foreclose on the leasehold mortgage (whether by judicial foreclosure, non-judicial foreclosure, or otherwise) and to accept a deed or assignment in lieu of foreclosure. The purchaser at any foreclosure sale (or the transferee under a deed or assignment in lieu) shall be recognized as the successor tenant under the Ground Lease, subject to compliance with the conditions set forth in the SNDA.
C. Required Amendments and Supplements for Ironclad and Granite Peak
Following our review of the Existing SNDA and the term sheets for the Senior Loan and the Mezzanine Loan, we have identified the following provisions that are insufficient or inconsistent with the requirements of Ironclad and Granite Peak, and which must be addressed in an amended and restated SNDA (or a new replacement SNDA):
1. Named Lender. The Existing SNDA names Sentinel Institutional Lending Group as the recognized leasehold mortgagee. The amended SNDA must name Ironclad National Bank, N.A., as Administrative Agent for the Senior Lenders, as the recognized leasehold mortgagee, together with its successors and assigns.
2. Syndication Protections. The Existing SNDA does not address loan syndication. The amended SNDA must confirm that the protections afforded to the leasehold mortgagee extend to all assignees, participants, and co-lenders in the Senior Loan syndicate, including Ridgeline Savings Bank, Atlas Mutual Insurance Company, Commonwealth Trust Company, Harborview Federal Savings Bank, and Meridian Pacific Bank, and any future assignees or participants.
3. Extended Cure Periods. The cure periods in the Existing SNDA (fifteen (15) days for monetary defaults; sixty (60) days for non-monetary defaults) fall short of Ironclad's typical requirements. Ironclad requires:
• For monetary defaults: thirty (30) days beyond the expiration of the tenant's cure period.
• For non-monetary defaults: ninety (90) days beyond the expiration of the tenant's cure period, plus additional time if the cure requires possession or the commencement of foreclosure proceedings.
We will need to negotiate with NYCEDC to extend the cure periods in the amended SNDA to match Ironclad's requirements.
4. New Lease Provisions. The Existing SNDA provides a ninety (90) day period within which the leasehold mortgagee must request a New Lease following Ground Lease termination. Ironclad typically requires a minimum of one hundred eighty (180) days to allow sufficient time to evaluate the situation, engage counsel, and determine whether to exercise the New Lease option. Additionally, the amended SNDA must confirm that:
• The New Lease term equals the full then-remaining term of the Ground Lease (as if the Ground Lease had not been terminated);
• The New Lease is granted free and clear of any liens, encumbrances, or interests created by NYCEDC after the date of the original Ground Lease;
• All subleases in effect at the time of Ground Lease termination shall be preserved and recognized under the New Lease; and
• The New Lease shall be entitled to the same priority and protections as the original Ground Lease.
5. Consent to Assignment of Leasehold Mortgage. The amended SNDA must provide that the leasehold mortgagee may assign, transfer, or participate its interest in the leasehold mortgage without the prior written consent of NYCEDC, subject only to the requirement that the assignee qualify as an Institutional Lender (as defined in the Ground Lease). This is critical for Ironclad's ability to syndicate, sell, or securitize the Senior Loan.
6. Casualty and Condemnation Proceeds. The Existing SNDA does not address the allocation or control of insurance or condemnation proceeds between the landlord, tenant, and leasehold mortgagee. The amended SNDA must provide that:
• The leasehold mortgagee has the right to receive and control insurance proceeds arising from any casualty affecting the Premises, subject to the restoration obligations under the Ground Lease and the terms of the loan documents;
• The leasehold mortgagee has the right to receive and control condemnation awards attributable to the leasehold interest (including the value of improvements), subject to the allocation provisions of the Ground Lease; and
• NYCEDC shall not settle any insurance claim or condemnation proceeding without the prior written consent of the leasehold mortgagee (not to be unreasonably withheld).
7. Bankruptcy Protections. The amended SNDA must address NYCEDC's obligations in the event that the tenant becomes the subject of a proceeding under the United States Bankruptcy Code (11 U.S.C. § 101 et seq.), including:
• NYCEDC's agreement not to seek termination of the Ground Lease without providing notice to the leasehold mortgagee and affording the leasehold mortgagee an opportunity to cure defaults and exercise its New Lease rights;
• NYCEDC's agreement to recognize the leasehold mortgagee's right to receive assignment of the Ground Lease pursuant to Section 365 of the Bankruptcy Code; and
• NYCEDC's covenant to cooperate with the leasehold mortgagee in any proceeding relating to the assumption, assignment, or rejection of the Ground Lease in bankruptcy.