MEMORANDUM
CALDERWOOD & HARKNESS LLP One Liberty Plaza, 55th Floor New York, NY 10006
TO: Douglas Fairchild, Partner, Real Estate Practice Group Angela Fontaine, Partner, Real Estate Practice Group
FROM: Grace Nakamura, Senior Associate, Real Estate Practice Group
DATE: March 20, 2025
RE: Title Review Memorandum and Exceptions Analysis — Hudson Yards West 450 West 34th Street, New York, NY 10001 Manhattan Block 729, Lots 1, 5, 12, 15
MATTER NO.: 1031-00004
CLIENT: Metropolitan Transit Development Corp. ("MTDC")
I. Executive Summary
This memorandum presents a comprehensive analysis of the title commitment (Commitment No. STN-2025-MH-04178) issued by Sentinel Title & Escrow Company ("Sentinel Title") for the real property located at 450 West 34th Street, New York, New York 10001, identified on the Tax Map of the City of New York, Borough of Manhattan, as Block 729, Lots 1, 5, 12, and 15 (the "Project Site"), in connection with the proposed financing of the Hudson Yards West mixed-use development project (the "Project"). Specifically, this memorandum addresses the proposed: (a) ALTA Lender's Title Insurance Policy in the amount of $475,000,000 (the "Senior Mortgage Policy") to be issued in favor of Ironclad National Bank, N.A., as Administrative Agent (the "Agent") for the benefit of the senior mortgage lending syndicate; and (b) separate mezzanine/UCC title insurance policy in the amount of $200,000,000 (the "Mezzanine Policy") for the benefit of Granite Peak Capital Partners, LP ("Granite Peak"), as mezzanine lender.
Key Findings. The title commitment identifies a total of eighteen (18) Schedule B-II exceptions to coverage. Of these, five (5) are standard printed exceptions that we recommend be deleted or modified through the delivery of customary affidavits, indemnities, and endorsements. The remaining thirteen (13) are specific recorded exceptions or matters identified through the title search, each of which is analyzed in detail in Section IV below. Of the thirteen specific exceptions, seven (7) may be accepted in their current form or with minor modifications, three (3) require curative action or further documentation prior to closing, and three (3) require additional investigation and coordination with other due diligence workstreams before a final recommendation can be made.
Critical Issues. The following items represent the most significant title and insurability issues identified in this review:
(a) Ground Lease Leasehold Interest. The insured estate is a leasehold estate under the Ground Lease between NYCEDC (as fee owner and ground lessor) and MTDC (as ground lessee). The proposed financing structure contemplates a contribution or sublease of the leasehold interest to Hudson Yards West Mortgage LLC ("HYW Mortgage LLC"), a Delaware special purpose entity to be formed, which will serve as borrower under the senior mortgage loan. This structure raises specific title insurance considerations, including the requirement for an ALTA 13-series leasehold endorsement, ground lessor consent and recognition, and confirmation that the ground lease mortgagee protection provisions satisfy lender requirements.
(b) ULURP-Related Restrictive Declaration. A restrictive declaration was recorded against the Project Site in connection with the Uniform Land Use Review Procedure ("ULURP") approval of the Project (ULURP Application No. C 230415 ZSM). The restrictive declaration imposes conditions on permitted uses, density and floor area ratio ("FAR") limitations, public access requirements, and mandatory transit infrastructure improvements. We must confirm that the covenants in the restrictive declaration do not impair the priority or enforceability of the proposed mortgage lien, and that the endorsement package adequately addresses these restrictions.
(c) Potential Survey Encroachments. Preliminary review of site conditions and available mapping suggests potential encroachments relating to utility easements and the MTA/NYCTA transit infrastructure easement. A final determination requires completion and review of the updated ALTA/NSPS Land Title Survey, which is currently being prepared.
(d) Municipal Lien Status. Updated real property tax, water, and sewer searches must be obtained and reviewed to confirm that all municipal charges are current and that no liens exist that would be superior to the proposed mortgage.
(e) Lot Consolidation/Merger. The Project Site currently comprises four (4) separate tax lots (Lots 1, 5, 12, and 15 on Block 729). A lot merger or consolidation application must be filed with the NYC Department of Finance, or alternatively, Sentinel Title must confirm its willingness to insure over the separate lots under a single policy with the appropriate contiguity endorsement (ALTA 4.0 or ALTA 19 series).
Overall Assessment. Subject to the curative actions identified in this memorandum, the title to the Project Site is insurable and appears capable of being brought to a condition satisfactory for the contemplated closing on the target date of June 15, 2025. However, several items are time-sensitive and require prompt initiation, including the lot consolidation application, NYCEDC consent and estoppel, formation of the special purpose entities, and the updated survey. A detailed action item list with deadlines and responsible parties is set forth in Section VII and Exhibit E.
Coordination. To bring the title to a closeable condition, coordination will be required with the following individuals and their respective teams:
• Patricia Eng, Closing Officer, Sentinel Title & Escrow Company — title commitment interpretation, endorsement negotiations, premium estimates, gap indemnity, insured closing letter, and curative requirements.
• Raymond Cho, Partner, Hargrove & Linden, P.C. — zoning and land use counsel — ULURP compliance documentation, restrictive declaration analysis, lot consolidation, zoning lot development agreement review, and delivery of zoning opinion (anticipated April 15, 2025).
• Dr. Rajesh Banerjee, P.E., Trident Structural Engineers — survey review and coordination regarding structural/improvement overlap with easement areas and transit infrastructure.
• Rafael Dominguez, Associate, Calderwood & Harkness LLP — curative follow-up, entity formation, municipal searches, and ongoing coordination with Sentinel Title.
Additional coordination touchpoints include Marcus Jennings and Lydia Okafor of MTDC (ground lessor consent and corporate authority documentation), Sylvia Hartwell of C&H's Tax Practice Group (transfer tax exemption analysis), Harrison Whitmore of Clearfield Whitmore LLP (lender's counsel for Ironclad), Natasha Ivanovic of Van Rensselaer & Blackwell LLP (counsel for Granite Peak), and Connor McBride of MTDC (survey engagement and project management).
II. Description of the Commitment
A. Commitment Particulars
The following summarizes the principal terms of the title commitment under review:
Commitment Number: STN-2025-MH-04178
Effective Date of Commitment: March 14, 2025, at 5:00 p.m. (Eastern Time)
Date Title Search Ordered: March 10, 2025
Date of Title Search: March 15, 2025
Date Report Delivered: March 20, 2025
Issuing Agent: Sentinel Title & Escrow Company, 140 Broadway, 20th Floor, New York, NY 10005
Underwriter: Sentinel National Title Insurance Company (a subsidiary of Sentinel Financial Holdings, Inc.)
Closing Officer: Patricia Eng, Vice President and Senior Title Officer
Telephone: (212) 555-8400
Email: peng@sentineltitle.com
The commitment was issued pursuant to the standard ALTA form commitment for title insurance, subject to the Conditions attached to the commitment jacket. The commitment is subject to the standard sixty (60) day commitment period, expiring on May 13, 2025. We will need to request an extension of the commitment period through at least June 30, 2025, to provide a buffer beyond the target closing date of June 15, 2025. I have already communicated this request informally to Patricia Eng, and she has indicated that an extension to July 15, 2025, should be obtainable upon written request and payment of any applicable continuation fee.
B. Schedule A — Insured, Amount, and Estate
Proposed Insured (Senior Mortgage Policy). Schedule A identifies the proposed insured under the senior mortgage loan policy as:
Ironclad National Bank, N.A., as Administrative Agent for the benefit of the Lenders party to that certain Loan Agreement dated as of [__], 2025, among Hudson Yards West Mortgage LLC, as Borrower, Ironclad National Bank, N.A., as Administrative Agent, and the Lenders from time to time party thereto.
The lending syndicate for the senior mortgage loan comprises the following institutions: Ironclad National Bank, N.A. (as lead arranger and administrative agent), Ridgeline Savings Bank, Atlas Mutual Insurance Company, Commonwealth Trust Company, Harborview Federal Savings Bank, and Meridian Pacific Bank. The specific allocation of commitments among the syndicate members is set forth in the term sheet dated February 28, 2025, and will be finalized in the loan agreement. For purposes of the title insurance policy, it is sufficient and customary that the Agent be named as the sole insured, with the benefit inuring to the syndicate members through the agency provisions of the loan agreement.
Policy Amount (Senior Mortgage Policy). $475,000,000, representing the full principal amount of the senior mortgage loan. The commitment contemplates a future advance provision consistent with the construction loan structure, and accordingly, the ALTA 14 (Future Advance) endorsement and ALTA 32/33 (Construction Loan/Disbursement) endorsements will be required, as discussed in Section VI below.
Proposed Insured (Mezzanine/UCC Policy). Schedule A of a separate commitment (or rider to the principal commitment) identifies the proposed insured under the mezzanine policy as:
Granite Peak Capital Partners, LP
Policy Amount (Mezzanine/UCC Policy). $200,000,000, representing the full principal amount of the mezzanine loan. The mezzanine loan will be secured by a pledge of 100% of the membership interests in HYW Mortgage LLC, held by Hudson Yards West Mezzanine LLC ("HYW Mezzanine LLC"), rather than by a direct lien on the real property. Accordingly, the mezzanine title insurance product will take the form of either: (i) a UCC title insurance policy insuring the validity, priority, and enforceability of the UCC-1 financing statement filed against the pledged membership interests; or (ii) an equity interest endorsement to a lender's title insurance policy. We are awaiting confirmation from Sentinel Title as to the specific form of mezzanine title insurance product available, and Patricia Eng has indicated that Sentinel Title is prepared to issue a standalone UCC insurance policy in the form customarily used in New York mezzanine lending transactions. Sentinel Title has further indicated that issuance of the mezzanine policy may require delivery of: (a) a copy of the executed operating agreement of HYW Mortgage LLC, (b) an organizational chart showing the ownership structure, (c) the executed pledge and security agreement, (d) a UCC-1 financing statement in proper form for filing with the Delaware Secretary of State, and (e) legal opinions regarding the enforceability of the pledge and the proper perfection of the security interest. We will coordinate with Natasha Ivanovic at Van Rensselaer & Blackwell LLP ("VRB") regarding Granite Peak's specific requirements for the form and scope of the mezzanine policy.
Estate or Interest. The estate to be insured under the Senior Mortgage Policy is described in Schedule A as:
Leasehold estate, as created by that certain Amended and Restated Ground Lease dated as of June 1, 2020 (the "Ground Lease"), between New York City Economic Development Corporation ("NYCEDC"), as ground lessor, and Metropolitan Transit Development Corp. ("MTDC"), as ground lessee, a memorandum of which was recorded in the Office of the City Register of the City of New York, New York County, on June 15, 2020, at CRFN 2020000198762.
This is a leasehold mortgage transaction, which adds a layer of complexity to the title insurance analysis. The insured estate derives from the Ground Lease, and the validity, enforceability, and priority of the proposed mortgage lien are dependent upon the continued existence and non-termination of the Ground Lease. As further discussed in Section VIII below, the ALTA 13-series leasehold endorsement is critical to ensuring that the lender's policy provides adequate coverage for the leasehold interest.
It is important to note the interplay between MTDC's leasehold interest and the contemplated subleasehold/mortgage structure. As currently structured, MTDC will contribute its leasehold interest (or a subleasehold interest) to HYW Mortgage LLC, which will serve as the borrower under the senior mortgage loan. HYW Mortgage LLC will grant a mortgage lien on its leasehold (or subleasehold) interest to the Agent for the benefit of the senior lenders. Simultaneously, 100% of the membership interests in HYW Mortgage LLC will be held by HYW Mezzanine LLC, which will pledge those interests to Granite Peak as security for the mezzanine loan. The precise mechanics of the contribution (direct assignment of the ground lease vs. sublease) remain under discussion and will affect the title insurance structure. We recommend that this structure be finalized no later than April 15, 2025, to allow sufficient time for Sentinel Title to prepare the pro forma policy and endorsements.
Land Description. The Project Site is described in Schedule A by reference to the Tax Map of the City of New York, Borough of Manhattan, as follows:
Block 729, Lot 1; Block 729, Lot 5; Block 729, Lot 12; and Block 729, Lot 15, Borough of Manhattan, County of New York, City and State of New York; commonly known as 450 West 34th Street, New York, NY 10001.
A full metes and bounds description is included in Schedule A as Exhibit 1 thereto and is reproduced as Exhibit D to this memorandum. The metes and bounds description must be confirmed against the updated ALTA/NSPS Land Title Survey upon its completion. Any discrepancies between the legal description in the commitment and the survey must be reconciled prior to the issuance of the final policy. The legal description encompasses all four lots, describing them as a single contiguous parcel. This is consistent with the intended lot consolidation but, as noted in Section III.B below, the formal lot merger has not yet been completed.
C. Vesting
Current Record Title Holder. Schedule A identifies the current vesting of the fee simple estate and the leasehold estate as follows:
Fee Simple Owner: New York City Economic Development Corporation ("NYCEDC"), a not-for-profit corporation organized and existing under the laws of the State of New York, acting under contract with the City of New York.
Leasehold Interest: Metropolitan Transit Development Corp. ("MTDC"), a government instrumentality of the State of Illinois, organized and existing pursuant to the Metropolitan Transit Development Act, 70 ILCS 3615, as amended.
Chain of Title for the Ground Lease. The chain of title for the Ground Lease is as follows:
(a) NYCEDC acquired fee title to the Project Site pursuant to a series of transactions involving the City of New York, the former Metropolitan Transportation Authority real property holdings, and various private landowners. The most recent deed into NYCEDC was recorded on March 12, 2018, at CRFN 2018000102543, conveying the last remaining parcels (Lots 12 and 15). Prior conveyances into NYCEDC for Lots 1 and 5 are recorded at CRFN 2016000076421 and CRFN 2017000089334, respectively.
(b) On June 1, 2020, NYCEDC entered into the Amended and Restated Ground Lease with MTDC, demising the Project Site for the development of the Project. A Memorandum of Ground Lease was recorded on June 15, 2020, at CRFN 2020000198762.
(c) On September 30, 2021, NYCEDC and MTDC entered into a First Amendment to the Ground Lease, modifying certain build-out deadlines and adjusting the permitted use provisions to accommodate the expanded transit infrastructure component. A Memorandum of First Amendment to Ground Lease was recorded on October 10, 2021, at CRFN 2021000267891.
(d) No further amendments to the Ground Lease have been recorded as of the effective date of the commitment.
The title commitment does not identify any breaks in the chain of title for the fee estate or the leasehold estate. However, we note that the acquisition of the individual lots by NYCEDC occurred over a period of approximately two years (2016–2018), and we recommend confirming with Sentinel Title that the full chain of title for each lot has been examined back to the standard sixty (60) year search period required under New York practice, or such other period as Sentinel Title customarily employs.
Anticipated Contribution/Sublease Structure. As noted above, prior to closing, MTDC will contribute its leasehold interest (or grant a subleasehold interest) to HYW Mortgage LLC. The precise mechanics of this transfer are under discussion with MTDC's general counsel, Lydia Okafor, and will need to be structured in a manner that: (i) satisfies the Ground Lease's transfer and assignment provisions, (ii) obtains the requisite consent of NYCEDC, (iii) preserves MTDC's rights under the Ground Lease (particularly the mortgagee protection provisions), (iv) qualifies HYW Mortgage LLC as a "Permitted Transferee" or "Permitted Mortgagee" under the Ground Lease, and (v) does not trigger adverse tax consequences (including real property transfer taxes, which are addressed by Sylvia Hartwell's analysis referenced in Section III.A, Item 7).
Upon the contribution of the leasehold interest to HYW Mortgage LLC, 100% of the membership interests in HYW Mortgage LLC will be owned by HYW Mezzanine LLC, which in turn will be wholly owned by MTDC. HYW Mezzanine LLC will then pledge all of its membership interests in HYW Mortgage LLC to Granite Peak as collateral for the mezzanine loan. This structure is consistent with standard New York mezzanine lending practice and is reflected in the organizational chart attached to the term sheet.
III. Schedule B — Part I: Requirements
The following is a detailed analysis of each requirement set forth in Schedule B-I of the commitment, together with our recommended action and identification of the responsible party.
A. Standard Pre-Closing Requirements
Requirement 1 (Commitment ¶ B-I-1): Payment of Title Insurance Premiums and Recording Charges.
Description: Payment of the applicable title insurance premiums for the Senior Mortgage Policy and the Mezzanine Policy, together with all applicable recording charges, endorsement premiums, search fees, and related title expenses.
Analysis: This is a standard requirement. Title insurance premiums in New York are regulated by the New York State Department of Financial Services. For a $475,000,000 mortgage policy, the estimated basic premium is approximately $1,236,000 (based on the current New York promulgated rate schedule for mortgage policies), plus endorsement premiums estimated at approximately $95,000–$125,000 depending on the final endorsement list. The mezzanine/UCC policy premium will be separately quoted by Sentinel Title; mezzanine title insurance premiums are not subject to the standard promulgated rate schedule and are typically negotiated. Recording charges will depend on the number of instruments to be recorded and the applicable page and CRFN fees.
Recommended Action: Obtain final premium estimates from Patricia Eng and circulate to the client for budgeting purposes. Premiums are typically payable at closing. Confirm whether MTDC or HYW Mortgage LLC will be responsible for premium payment under the loan agreement.
Responsible Party: Grace Nakamura / Patricia Eng.
Requirement 2 (Commitment ¶ B-I-2): Delivery of Mortgage and Related Documents.
Description: Delivery to Sentinel Title of the executed and acknowledged mortgage and assignment of leases and rents (the "Mortgage") in recordable form, together with UCC-1 financing statements covering fixtures and other personal property.
Analysis: The Mortgage will be granted by HYW Mortgage LLC, as borrower, in favor of the Agent, encumbering HYW Mortgage LLC's leasehold interest in the Project Site. The form of Mortgage is being prepared by Clearfield Whitmore LLP (lender's counsel) and will be reviewed by our office. The Mortgage must comply with New York Real Property Law ("RPL") requirements for recording, including the statutory form of acknowledgment under RPL § 309-a and the mortgage recording tax affidavit requirements under NYC Administrative Code § 11-2105. Additionally, UCC-1 financing statements will be filed with the New York Department of State (fixture filings) and the Delaware Secretary of State (as to the mezzanine pledge of membership interests).
Recommended Action: Coordinate with Clearfield Whitmore LLP (Harrison Whitmore) on the form of Mortgage and UCC-1. Review for New York recording requirements. Ensure that the Mortgage properly describes the leasehold estate as the encumbered interest and references the Ground Lease by its recording information.
Responsible Party: Grace Nakamura / Harrison Whitmore (Clearfield).
Requirement 3 (Commitment ¶ B-I-3): Ground Lessor Recognition Agreement / Estoppel.
Description: Delivery of a ground lessor recognition agreement and estoppel certificate from NYCEDC acknowledging: (a) the existence and current status of the Ground Lease; (b) that no defaults or events of default currently exist under the Ground Lease; (c) the amount of ground rent and the date through which ground rent has been paid; (d) NYCEDC's consent to the encumbrance of the leasehold interest by the Mortgage; (e) NYCEDC's agreement to provide notice to the Agent of any default under the Ground Lease and to allow the Agent a reasonable cure period; and (f) NYCEDC's agreement to enter into a new lease with the Agent (or its designee) in the event of termination of the Ground Lease, on the same terms and conditions.
Analysis: This is a critical requirement. Without the ground lessor recognition agreement and estoppel, Sentinel Title may decline to issue the ALTA 13 leasehold endorsement, and the senior lenders will not be satisfied that their mortgage lien has adequate protection against termination of the Ground Lease. The Ground Lease contains provisions in Article XV that address the rights of "Permitted Mortgagees," including notice and cure rights and new lease provisions. However, lender's counsel typically requires a standalone recognition agreement that is directly enforceable by the Agent, rather than relying solely on the provisions of the Ground Lease.
NYCEDC, as a quasi-governmental entity operating under contract with the City of New York, has its own form of recognition agreement and its own internal approval process. Based on prior transactions involving NYCEDC ground leases (including the Westvale Industries/Hudson Yards transaction and the Aldermere & Co. Manhattan West transaction), the NYCEDC approval process can take four to six weeks from submission of a complete package. Given the target closing date of June 15, 2025, the request must be submitted no later than early May 2025, and ideally sooner.
Recommended Action: Coordinate immediately with Marcus Jennings and Lydia Okafor at MTDC to initiate the request to NYCEDC. Prepare draft recognition agreement for submission. Confirm NYCEDC's current form and contact the NYCEDC general counsel's office to ascertain the expected timeline. Calendar a follow-up for no later than April 15, 2025.
Responsible Party: Marcus Jennings (MTDC) / Lydia Okafor (MTDC General Counsel) / Grace Nakamura (C&H).
Requirement 4 (Commitment ¶ B-I-4): Evidence of Formation and Good Standing — HYW Mortgage LLC.
Description: Delivery of: (a) a certified copy of the Certificate of Formation of HYW Mortgage LLC filed with the Delaware Secretary of State; (b) a Certificate of Good Standing from the Delaware Secretary of State dated no more than thirty (30) days prior to closing; (c) evidence of authority to do business in the State of New York (filing of Application for Authority with the New York Department of State, and issuance of a Certificate of Authority); (d) a certified copy of the Limited Liability Company Agreement (Operating Agreement) of HYW Mortgage LLC; and (e) evidence of authorized signatories (certificate of incumbency or manager/member resolution authorizing the execution and delivery of the loan documents).
Analysis: HYW Mortgage LLC has not yet been formed. Formation must be completed well in advance of closing to allow for: (i) obtaining an Employer Identification Number ("EIN") from the IRS; (ii) filing for authority to do business in New York; (iii) completion of "know your customer" (KYC) and anti-money laundering (AML) diligence by the senior lenders; and (iv) re-running UCC, judgment, lien, and bankruptcy searches against the newly formed entity. We recommend that formation be completed no later than May 1, 2025.
Recommended Action: Rafael Dominguez to coordinate with Lydia Okafor (MTDC General Counsel) regarding the formation documents. Prepare Certificate of Formation, Operating Agreement, and Application for Authority for New York filing. Obtain EIN immediately upon formation.
Responsible Party: Rafael Dominguez (C&H) / Lydia Okafor (MTDC).
Requirement 5 (Commitment ¶ B-I-5): Evidence of Formation and Good Standing — HYW Mezzanine LLC.
Description: Same as Requirement 4, but for HYW Mezzanine LLC.
Analysis: HYW Mezzanine LLC has similarly not yet been formed and must be organized as a Delaware limited liability company with authority to do business in New York. The same timeline considerations apply.
Recommended Action: Form HYW Mezzanine LLC concurrently with HYW Mortgage LLC.
Responsible Party: Rafael Dominguez (C&H) / Lydia Okafor (MTDC).
Requirement 6 (Commitment ¶ B-I-6): Evidence of MTDC's Authority.
Description: Delivery of evidence of MTDC's authority to contribute its leasehold interest to HYW Mortgage LLC and to cause HYW Mortgage LLC to enter into the senior loan transaction, including: (a) a certified copy of the board resolution of MTDC's Board of Directors (Chair: Margaret Kowalski) authorizing the transaction; (b) a certificate of incumbency for the officers authorized to execute documents on behalf of MTDC; and (c) evidence that MTDC has the legal capacity to enter into the transaction under its enabling legislation (the Metropolitan Transit Development Act, 70 ILCS 3615, as amended) and any applicable state or federal authorization requirements.
Analysis: MTDC is a government instrumentality of the State of Illinois, organized pursuant to the Metropolitan Transit Development Act. As such, its authority to engage in the proposed transaction must be traced to its enabling legislation and any resolutions of its governing board. The enabling legislation authorizes MTDC to "acquire, hold, develop, and dispose of real property" and to "enter into contracts, loans, and financing arrangements as necessary to accomplish its statutory purposes" (70 ILCS 3615/2.09(e)). However, the legislation also requires board approval for any transaction involving indebtedness in excess of $50,000,000 (70 ILCS 3615/4.01(b)), which threshold is clearly exceeded here.
We understand from Lydia Okafor that a board meeting is expected to be scheduled in late April or early May 2025 at which the board will consider and approve the proposed financing. The resolution should specifically authorize: (i) the contribution of the leasehold interest to HYW Mortgage LLC; (ii) the incurrence of the senior mortgage loan and the mezzanine loan; (iii) the granting of the Mortgage and the execution and delivery of all related loan documents; and (iv) the designation of officers authorized to execute documents on behalf of MTDC and its subsidiaries.
Recommended Action: Coordinate with Lydia Okafor to prepare the board resolution and ensure that it is comprehensive enough to satisfy both Sentinel Title and lender requirements. Obtain a certified copy of the resolution, together with a secretary's certificate attesting to the adoption of the resolution and the incumbency of authorized officers.
Responsible Party: Lydia Okafor (MTDC General Counsel) / Margaret Kowalski (Board Chair) / Grace Nakamura (C&H, review).
Requirement 7 (Commitment ¶ B-I-7): Real Estate Transfer Tax Forms.
Description: Delivery of completed and executed real estate transfer tax forms, including: (a) NYC Real Property Transfer Tax Return (Form NYC-RPT); and (b) New York State Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax (Form TP-584).
Analysis: The contribution of MTDC's leasehold interest to HYW Mortgage LLC may constitute a "transfer" subject to New York City real property transfer tax (RPTT) under NYC Administrative Code § 11-2102 and New York State real estate transfer tax under NY Tax Law § 1402. However, there may be an exemption available based on MTDC's status as a government instrumentality. Under NYC Administrative Code § 11-2106(b)(3), transfers by or to certain governmental entities may be exempt from RPTT. Similarly, NY Tax Law § 1405(b)(1) provides an exemption for conveyances to or by governmental entities. Whether MTDC qualifies for these exemptions depends on whether it is classified as a "governmental entity" under the applicable tax statutes, which may differ from its classification under the Metropolitan Transit Development Act.
Additionally, the mortgage recording tax under NY Tax Law § 253 will apply to the recording of the Mortgage. At the current combined New York City and New York State rate of 2.80% for mortgages on commercial property in amounts of $500,000 or more in New York City, the mortgage recording tax on a $475,000,000 mortgage would be approximately $13,300,000. This is a significant closing cost and should be confirmed with the client and the lenders.
Recommended Action: Sylvia Hartwell (C&H Tax) is reviewing the transfer tax exemption issue and is expected to provide her analysis prior to the first draft distribution date of May 1, 2025. We should also confirm with Sylvia whether any portion of the mortgage recording tax may be exempt or reduced based on MTDC's governmental status or the availability of a "spread" transaction structure.
Responsible Party: Sylvia Hartwell (C&H Tax) / Grace Nakamura (coordination).
Requirement 8 (Commitment ¶ B-I-8): Payoff Statements and Satisfactions.
Description: Delivery of payoff statements and satisfactions for any existing mortgages, liens, or encumbrances of record against the Project Site.
Analysis: Based on our review of the commitment, no existing mortgages or deeds of trust appear of record against the leasehold interest. This is consistent with the fact that MTDC has not previously financed the Project. However, we must confirm that no liens or encumbrances have been filed against the Project Site between the effective date of the commitment (March 14, 2025) and the closing date. This is addressed by the gap indemnity discussed in Section IV.A, Item 5 below.
Recommended Action: Confirm with Sentinel Title that no prior mortgages or unsatisfied liens appear of record. If any such instruments are identified in updated searches, obtain payoff statements and arrange for satisfactions to be delivered at or before closing.
Responsible Party: Sentinel Title / Patricia Eng.
Requirement 9 (Commitment ¶ B-I-9): Updated Survey.
Description: Delivery of an updated ALTA/NSPS Land Title Survey of the Project Site, prepared in accordance with the 2021 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys, including applicable Table A optional items, and certified to Sentinel Title, Ironclad National Bank, N.A. (as Agent), Granite Peak Capital Partners, LP, and Calderwood & Harkness LLP.
Analysis: The survey is a critical deliverable for both title insurance and lender due diligence purposes. The survey will serve as the basis for: (i) the replacement of the standard survey exception (Schedule B-II, Item 2) with a specific "survey reading" exception; (ii) the issuance of survey-related endorsements (ALTA 25 — Same as Survey; ALTA 9 series — Restrictions, Encroachments, Minerals; ALTA 17 — Access and Entry; ALTA 19 — Contiguity; ALTA 28 — Easement Damage); and (iii) identification of any encroachments, easement conflicts, boundary discrepancies, or flood zone issues.
Connor McBride of MTDC has engaged a licensed surveyor to prepare the updated survey, and we understand that fieldwork is underway. The target delivery date for the completed survey is May 1, 2025, which is the first draft distribution date. This timeline is tight, and we recommend that Connor McBride be contacted to confirm that the survey is on track.
Recommended Action: Confirm survey engagement and delivery timeline with Connor McBride. Provide the surveyor with a list of Table A optional items required by the lenders (to be obtained from Clearfield Whitmore). Ensure proper certification language. Review upon receipt and coordinate with Sentinel Title for survey reading.
Responsible Party: Connor McBride (MTDC) / Grace Nakamura (review) / Patricia Eng (survey reading).
Requirement 10 (Commitment ¶ B-I-10): Tax Search.
Description: Delivery of a current tax search confirming that all real property taxes, water and sewer charges, and assessments are paid current for Block 729, Lots 1, 5, 12, and 15.
Analysis: New York City real property taxes are billed quarterly and are payable on July 1, October 1, January 1, and April 1. Water and sewer charges are billed separately by the NYC Department of Environmental Protection. Any unpaid taxes, water charges, or assessments constitute liens against the property that are superior to any mortgage lien. The tax search must confirm that: (i) all real property taxes have been paid through the current fiscal quarter; (ii) all water and sewer charges are current; (iii) no special assessments are delinquent; and (iv) no tax sale certificates have been issued.
Recommended Action: Order tax and water/sewer searches through Sentinel Title. Searches should be ordered no later than ten (10) business days prior to closing to ensure currency. A date-down continuation at closing may also be required.
Responsible Party: Sentinel Title / Patricia Eng / Rafael Dominguez (follow-up).
Requirement 11 (Commitment ¶ B-I-11): Judgment, Lien, and Bankruptcy Searches.
Description: Delivery of current searches for judgments, federal tax liens, state tax liens, UCC financing statements, and bankruptcy filings against: (a) Metropolitan Transit Development Corp.; (b) Hudson Yards West Mortgage LLC; (c) Hudson Yards West Mezzanine LLC; and (d) any other party in the chain of title or with an interest in the Project Site.
Analysis: The judgment and lien searches are essential to confirm that no adverse interests or claims exist that could affect the priority of the proposed Mortgage. With respect to MTDC, given its status as a government instrumentality, the likelihood of adverse judgments or tax liens is relatively low, but the search must nonetheless be conducted as a matter of title insurance underwriting practice. With respect to HYW Mortgage LLC and HYW Mezzanine LLC, these entities have not yet been formed and therefore cannot be searched at this time. Searches against these entities must be conducted after formation and prior to closing.
Recommended Action: Order searches against MTDC immediately. Re-run searches against HYW Mortgage LLC and HYW Mezzanine LLC upon formation (expected no later than May 1, 2025). Patriot Act / OFAC searches should also be conducted.
Responsible Party: Rafael Dominguez (C&H) / Sentinel Title.
Requirement 12 (Commitment ¶ B-I-12): Leasehold Policy-Specific Requirements.
Description: Sentinel Title has identified additional requirements specific to the issuance of a leasehold policy with the ALTA 13-series endorsement, including: (a) a complete and legible copy of the Ground Lease and all amendments; (b) a certification from the ground lessee that the Ground Lease is in full force and effect, has not been modified (except as disclosed), and that no defaults exist; (c) evidence of current ground rent payments; and (d) such other documentation as Sentinel Title may reasonably require to assess the leasehold estate.
Analysis: These are standard requirements for leasehold title insurance. We have previously provided Sentinel Title with copies of the Ground Lease and the First Amendment. We will need to obtain the ground lessee's certification and evidence of ground rent payments from MTDC.
Recommended Action: Coordinate with Lydia Okafor (MTDC General Counsel) to prepare the lessee's certification. Obtain evidence of ground rent payments for the preceding twelve (12) months.
Responsible Party: Grace Nakamura / Lydia Okafor (MTDC).
B. Non-Standard / Transaction-Specific Requirements
Requirement 13 (Commitment ¶ B-I-13): Lot Consolidation.
Description: Sentinel Title requires evidence that Lots 1, 5, 12, and 15 on Block 729 have been merged or consolidated into a single tax lot, or, in the alternative, that an application for tax lot merger has been filed with the NYC Department of Finance and is pending approval, or that Sentinel Title has agreed to insure over the separate lots under a single policy with the appropriate contiguity endorsements.
Analysis: The Project Site currently comprises four (4) separate tax lots. While the lots are contiguous and are described in the commitment as a single parcel in the metes and bounds description, the failure to formally consolidate the lots can create complications for title insurance, including the need for separate policies or endorsements addressing the contiguity and unified treatment of the lots. The NYC Department of Finance processes lot merger applications, which typically require: (i) a completed application form; (ii) a survey or map showing the lots to be merged; (iii) evidence of common ownership (or, in this case, a common leasehold interest); and (iv) payment of any applicable fees. The processing time for lot merger applications varies but is typically four to eight weeks.
We have discussed this issue with Patricia Eng, and she has indicated that Sentinel Title is willing to insure over the separate lots under a single policy, provided that: (i) the ALTA 4.0 (Contiguity — Single Parcel) or ALTA 19.0/19.1 (Contiguity — Multiple Parcels) endorsement is issued; (ii) the updated survey confirms that the lots are contiguous; and (iii) the lots are under common ownership or leasehold control. Nevertheless, we recommend that the lot merger application be filed as a belt-and-suspenders measure, as the consolidated lot designation will simplify future title insurance matters and tax billing.
Recommended Action: Coordinate with Raymond Cho (Hargrove & Linden) to file the lot merger application with the NYC Department of Finance. Simultaneously, confirm with Sentinel Title that it will insure over the separate lots pending completion of the merger.
Responsible Party: Raymond Cho (Hargrove & Linden) / Patricia Eng (Sentinel Title).
Requirement 14 (Commitment ¶ B-I-14): ULURP Compliance Documentation.
Description: Sentinel Title requires delivery of copies of the City Planning Commission approval (dated September 12, 2023) and City Council approval (dated October 25, 2023) in connection with ULURP Application No. C 230415 ZSM, together with any restrictive declaration or other land use restriction recorded against the Project Site in connection with the ULURP approval.
Analysis: The ULURP process is the principal land use review procedure in New York City for certain discretionary actions, including special permits, zoning map amendments, and site selections. The Project received ULURP approval for a special permit under Section 89-21 of the New York City Zoning Resolution (Hudson Yards Special District), authorizing the proposed mixed-use development with specified density, use, and bulk parameters. The ULURP approval is subject to conditions set forth in a restrictive declaration recorded against the Project Site. The restrictive declaration is analyzed as Schedule B-II Exception 8 in Section IV.B below.
Recommended Action: Obtain certified copies of the CPC and City Council approvals from MTDC or from the NYC Department of City Planning. Provide to Sentinel Title. Coordinate with Raymond Cho for analysis of the restrictive declaration.
Responsible Party: Lydia Okafor (MTDC) / Raymond Cho (Hargrove & Linden) / Grace Nakamura (C&H).
Requirement 15 (Commitment ¶ B-I-15): Ground Lease Consent Provisions.
Description: Sentinel Title requires confirmation that the Ground Lease permits the mortgaging of the leasehold interest and that all required consents from NYCEDC have been obtained or will be obtained prior to closing.
Analysis: Article XV of the Ground Lease addresses the rights of "Permitted Mortgagees." Section 15.01 provides that the ground lessee may, without the prior written consent of the ground lessor, "encumber its leasehold interest under this Lease by one or more mortgages, deeds of trust, or similar security instruments" for the purpose of financing the development of the Project, subject to the following conditions: (a) the mortgage must be held by a "Permitted Mortgagee" (defined as a bank, insurance company, pension fund, or other institutional lender reasonably acceptable to the ground lessor); (b) the ground lessee must provide notice to the ground lessor within ten (10) business days of the recording of any such mortgage; and (c) the ground lessee must deliver to the ground lessor a copy of the mortgage and related loan documents. Notwithstanding Section 15.01, Section 15.05 provides that the ground lessee shall obtain the "prior written acknowledgment" of the ground lessor that the proposed mortgagee qualifies as a Permitted Mortgagee, which acknowledgment "shall not be unreasonably withheld."
We interpret these provisions as requiring advance confirmation from NYCEDC, though not a formal "consent." The practical effect, however, is the same: NYCEDC must provide written acknowledgment that Ironclad (as Agent) qualifies as a Permitted Mortgagee. This is being addressed through the ground lessor recognition agreement discussed in Requirement 3 above.
Recommended Action: Include Permitted Mortgagee acknowledgment in the ground lessor recognition agreement request to NYCEDC. Confirm that the form of recognition agreement addresses all requirements of Section 15.05.
Responsible Party: Grace Nakamura / Marcus Jennings (MTDC) / Lydia Okafor (MTDC).
Requirement 16 (Commitment ¶ B-I-16): NYC Transit Infrastructure Grant Documentation.
Description: Sentinel Title requires evidence that the $45,000,000 grant from the New York City Transit Authority ("NYCTA") for transit infrastructure improvements at the Project Site does not create a lien, encumbrance, reversionary interest, or other interest in the property that would be superior to or adversely affect the proposed Mortgage.
Analysis: MTDC received a $45,000,000 capital grant from NYCTA in connection with transit infrastructure improvements to be constructed as part of the Project, including improvements to the No. 7 Line subway station and related pedestrian connections. The grant was made pursuant to a Grant Agreement between NYCTA and MTDC dated July 15, 2022. We have requested a complete copy of the Grant Agreement from Lydia Okafor but have not yet received it. Key issues to be analyzed upon receipt include: (i) whether the Grant Agreement creates any lien on or security interest in the Project Site or the leasehold interest; (ii) whether the Grant Agreement creates any reversionary interest in favor of NYCTA (e.g., a right to recapture grant funds or to revert title to the improvements in the event of a default or change in use); (iii) whether the Grant Agreement requires consent from NYCTA for the proposed mortgage financing; and (iv) whether any memorandum or notice of the Grant Agreement has been recorded against the Project Site.
This is a significant issue that could affect the priority and insurability of the Mortgage. If the Grant Agreement creates a lien or reversionary interest, it may need to be subordinated to the Mortgage, or alternative arrangements may need to be negotiated.
Recommended Action: Obtain the complete Grant Agreement from MTDC immediately and review for adverse interests. Coordinate with Sentinel Title regarding the impact on insurability. If a lien or reversionary interest exists, engage with NYCTA counsel to negotiate a subordination or intercreditor arrangement.
Responsible Party: Grace Nakamura / Lydia Okafor (MTDC) / Patricia Eng (Sentinel Title).
IV. Schedule B — Part II: Exceptions from Coverage
A. Standard Printed Exceptions
The commitment contains five (5) standard printed exceptions, which are analyzed below with recommendations for deletion or modification.
Exception 1: Rights of Parties in Possession.
Text: "Rights or claims of parties in possession not shown by the public records."
Analysis: This is a standard exception that may be deleted upon delivery of a satisfactory affidavit of possession and a survey showing no parties in possession other than the insured (or its tenants pursuant to written leases that are disclosed). Based on our understanding, the Project Site is currently vacant and unimproved. MTDC has confirmed that no tenants, licensees, or other parties are in possession of the site, and that the site is secured by fencing with authorized access only. No construction has commenced.
Recommendation: Delete. Deliver an affidavit of possession from MTDC (executed by an authorized officer with personal knowledge of site conditions), together with the updated ALTA/NSPS survey, confirming that no parties are in possession other than MTDC and its authorized agents.
Responsible Party: Grace Nakamura / Lydia Okafor (MTDC — affidavit).
Exception 2: Survey Exception.
Text: "Any encroachment, encumbrance, violation, variation, or adverse circumstance affecting the title including discrepancies, conflicts in boundary lines, shortage in area, or any other facts which a correct survey would disclose, and which are not shown by the public records."
Analysis: This is the standard survey exception, which is routinely deleted or replaced in commercial transactions upon delivery of a current ALTA/NSPS survey. Upon receipt of the updated survey, Sentinel Title will issue a "survey reading" — that is, a modified exception that identifies specific survey matters (such as identified easements, encroachments, and boundary line discrepancies) rather than the blanket exception. Any matters shown on the survey that are unacceptable to the lenders must be addressed through curative action or endorsement.
Recommendation: Replace with specific survey reading upon receipt of updated ALTA/NSPS survey. Request ALTA 25 (Same as Survey) endorsement. Matters identified in the survey reading to be cross-referenced with Schedule B-II specific exceptions for consistency.
Responsible Party: Grace Nakamura / Patricia Eng (survey reading) / Connor McBride (MTDC — survey delivery).
Exception 3: Mechanic's Lien Exception.
Text: "Any lien or right to a lien for services, labor, or material heretofore or hereafter furnished, imposed by law and not shown by the public records."
Analysis: Mechanic's lien exposure is a significant concern in this transaction given that (a) construction is expected to commence on or about the closing date of June 15, 2025, under the guaranteed maximum price ("GMP") contract with Cobalt Construction Group (Contract No. CCG-HYW-2025-001, GMP $412,000,000); and (b) under New York Lien Law §§ 3 and 4, mechanic's liens can relate back to the date of the first visible improvement on the property and can prime a mortgage lien that is recorded after such improvement begins. Because the Mortgage will be recorded simultaneously with or shortly before the commencement of construction, the risk of mechanic's liens priming the Mortgage is acute unless properly managed.
There are several approaches to addressing this exception:
(i) Deletion with indemnity: Sentinel Title may agree to delete the mechanic's lien exception upon delivery of an indemnity from MTDC and/or HYW Mortgage LLC, supported by evidence that no construction work has been performed on the Project Site as of the date of recording of the Mortgage. This approach is effective only if no improvement has been commenced prior to the recording of the Mortgage.
(ii) Pending disbursement endorsement (ALTA 32/33): Because the senior loan is structured as a construction loan with future advances, the ALTA 32 (Construction Loan — Priority of Future Advances) and ALTA 33 (Disbursement) endorsements will provide coverage for mechanic's liens arising from construction work performed after recording of the Mortgage, subject to the terms and conditions of those endorsements. This is the customary approach for construction loan transactions.
(iii) Lien Law Article 3-A compliance: Under New York Lien Law Article 3-A, construction loan proceeds held by a borrower are trust funds for the benefit of subcontractors and materialmen. Compliance with the Lien Law trust fund provisions provides additional protection against lien claims. We will include Lien Law Article 3-A compliance representations and covenants in the loan documents.
Recommendation: Delete upon delivery of a "no improvement" affidavit from MTDC confirming that no construction work, demolition, or site preparation (other than surveys and investigations) has been performed on the Project Site. Additionally, order ALTA 32 and ALTA 33 endorsements for the construction loan period. Coordinate with Cobalt Construction Group regarding the timing of construction commencement to ensure that no work is performed prior to recording of the Mortgage.
Responsible Party: Grace Nakamura / Lydia Okafor (MTDC — affidavit) / Rafael Dominguez (Cobalt coordination).
Exception 4: Tax Lien Exception.
Text: "Taxes or assessments which are not shown as existing liens by the records of any taxing authority that levies taxes or assessments on real property or by the public records."
Analysis: This exception addresses unpaid taxes that may not yet appear in the public records. It is typically modified in commercial transactions to read: "Real property taxes and assessments for the fiscal year [20-20], a lien not yet due and payable." This modification limits the exception to current-year taxes that have been assessed but are not yet due, rather than leaving open the possibility of unknown tax liabilities.
Recommendation: Modify to read: "Real property taxes and assessments for the fiscal year July 1, 2025 to June 30, 2026, a lien not yet due and payable." Confirm with Sentinel Title that all prior fiscal year taxes have been paid in full based on the tax search (Requirement 10).
Responsible Party: Grace Nakamura / Patricia Eng.
Exception 5: Gap Exception (Date-Down).
Text: "Defects, liens, encumbrances, adverse claims, or other matters, if any, created, first appearing in the public records, or attaching subsequent to the effective date hereof but prior to the date the proposed insured acquires for value of record the estate or interest or mortgage thereon covered by this commitment."
Analysis: The "gap" exception covers the period between the effective date of the commitment (March 14, 2025) and the date of recording of the Mortgage (anticipated on or about June 15, 2025). This is a period of approximately three months during which adverse instruments could be recorded against the property. The standard approach in New York commercial transactions is to require Sentinel Title to issue an insured closing letter (also known as a "closing protection letter"), which provides coverage to the lender for the gap period, and to require a gap indemnity from the title company.
Recommendation: Require deletion upon delivery of an insured closing letter and gap indemnity from Sentinel Title. The insured closing letter should be issued in the standard ALTA form and should cover both the senior mortgage and mezzanine transactions.
Responsible Party: Grace Nakamura / Patricia Eng.
B. Specific Recorded Exceptions
The commitment identifies the following specific recorded exceptions, each of which is analyzed below.
Exception 6: Ground Lease.
Recording Information: Amended and Restated Ground Lease dated June 1, 2020, between NYCEDC (ground lessor) and MTDC (ground lessee); Memorandum of Ground Lease recorded June 15, 2020, at CRFN 2020000198762; First Amendment to Ground Lease dated September 30, 2021; Memorandum of First Amendment recorded October 10, 2021, at CRFN 2021000267891.
Summary: The Ground Lease is the foundational instrument from which the insured leasehold estate derives. It is not an "exception" to be removed; rather, the entire insured interest is created by this instrument. The Ground Lease demises the Project Site to MTDC for a term of ninety-nine (99) years, commencing June 1, 2020, and expiring May 31, 2119, with no renewal options (the term being sufficiently long that renewals were not deemed necessary). The annual ground rent is $4,200,000, subject to CPI adjustment every five (5) years, with the first adjustment date being June 1, 2025. The Ground Lease requires the ground lessee to construct the Project in accordance with approved plans and to comply with the ULURP restrictive declaration and all applicable law.
Impact on Insured Interest: The Ground Lease is the source of the insured estate. All provisions of the Ground Lease affect the insured leasehold interest. The key provisions relevant to the title insurance analysis are discussed in Section VIII below.
Recommendation: Accept. This exception will be reflected in the policy as part of the description of the insured leasehold estate. Confirm that all terms and recording references are correctly stated in the commitment. Ensure that the ALTA 13-series endorsement properly addresses the Ground Lease.
Responsible Party: Grace Nakamura.
Exception 7: Memorandum of Ground Lease.
Recording Information: Memorandum of Ground Lease recorded June 15, 2020, at CRFN 2020000198762, and Memorandum of First Amendment to Ground Lease recorded October 10, 2021, at CRFN 2021000267891.
Summary: The memoranda are recorded notices of the Ground Lease and First Amendment. They put the public on constructive notice of the ground lessee's interest in the Project Site and the material terms of the Ground Lease.
Impact on Insured Interest: The memoranda are complementary to Exception 6 and provide the record evidence of the Ground Lease. Consistency between the memoranda and the underlying Ground Lease and First Amendment must be confirmed.