MEMORANDUM
CONFIDENTIAL — ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT PRIVILEGED
I. Purpose and Scope
This memorandum summarizes the findings of the zoning and land use due diligence conducted in connection with the proposed $675,000,000 senior mortgage and mezzanine financing for the Hudson Yards West mixed-use development project (the "Project") to be constructed at 450 West 34th Street, New York, New York 10001 (Manhattan Block 729, Lots 1, 5, 12, and 15) (the "Project Site"). The Project is being developed by Metropolitan Transit Development Corporation ("MTDC" or the "Borrower") and its affiliated entities.
The analysis set forth in this memorandum is based primarily on the zoning opinion letter dated April 15, 2025, delivered by Hargrove & Linden, P.C. (Raymond Cho, Partner) (the "Zoning Opinion"), a copy of which is annexed hereto as Attachment A. In addition to the Zoning Opinion, our review encompassed the following sources and materials:
• Publicly available records of the New York City Department of City Planning ("DCP"), including zoning maps, special district regulations, and zoning lot documentation;
• Uniform Land Use Review Procedure ("ULURP") filings, certifications, resolutions, and related materials on file with DCP and the City Council;
• The New York City Zoning Resolution (the "ZR"), including Article IX, Chapter 3 (Sections 93-00 et seq.) governing the Special Hudson Yards District;
• The ALTA/NSPS Land Title Survey dated March 5, 2025, prepared by Meridian Surveying Associates, P.C. (the "Survey");
• The ground lease between the New York City Economic Development Corporation ("NYCEDC") and MTDC, dated June 1, 2020 (recorded at CRFN 2020000198762, NYC ACRIS) (the "Ground Lease");
• The Phase I Environmental Site Assessment prepared by Apex Environmental Consultants, Inc. (Project No. AEC-NY-25-0337, dated March 20, 2025) (the "Phase I ESA");
• CEQR and SEQRA environmental review documentation; and
• Various publicly available records of the New York City Department of Buildings ("DOB"), the Landmarks Preservation Commission ("LPC"), and the New York City Department of Housing Preservation and Development ("HPD").
This memorandum has been prepared for the use of the Drummond & Fenwick LLP deal team in connection with the captioned matter. It is intended to inform the closing opinions and due diligence deliverables required under (a) the Senior Mortgage Loan Agreement to be entered into between the Borrower and Ironclad National Bank, N.A. (the "Senior Lender") and (b) the Mezzanine Loan Agreement to be entered into between the mezzanine borrower entity and Granite Peak Capital Partners, LP (the "Mezzanine Lender" and, together with the Senior Lender, the "Lenders"). This memorandum is protected by the attorney-client privilege and the attorney work-product doctrine and should not be disclosed to any person or entity outside the deal team without the prior consent of the undersigned.
II. Executive Summary
Based on the review described herein, the principal conclusions of our zoning and land use due diligence are as follows:
• Zoning District. The Project Site is located within a C6-4 zoning district, subject to the Special Hudson Yards District overlay (ZR Article IX, Chapter 3, Sections 93-00 et seq.). The Project Site is situated within Subdistrict A (Large-Scale Plan Subdistrict), Subarea A2 (34th Street Corridor), as identified in the Zoning Opinion and confirmed through our review of the applicable DCP zoning maps and special district regulations.
• Maximum Permitted FAR. The maximum permitted floor area ratio ("FAR") applicable to the Project Site under the ZR, inclusive of all applicable bonuses available within the Special Hudson Yards District, is 18.0. This figure reflects the base C6-4 FAR of 10.0, supplemented by the District Improvement Bonus ("DIB") increment of 5.0 and the inclusionary housing bonus increment of 3.0.
• Project As-Designed FAR. The Project as currently designed has a FAR of 8.83, which is well within the maximum permitted envelope of 18.0. Significant unused development rights remain on the zoning lot, representing an unused FAR of approximately 9.17.
• ULURP Approvals. All required ULURP approvals for the Project have been obtained and are final and non-appealable. The ULURP application (Application No. C 230415 ZSM) received City Planning Commission ("CPC") approval on September 12, 2023, and City Council approval on October 25, 2023. The four-month statute of limitations for Article 78 challenges under CPLR § 217 has expired without any challenge having been filed.
• Mandatory Inclusionary Housing. The Project complies with the Mandatory Inclusionary Housing ("MIH") requirements applicable to the Project Site. The Project includes 163 affordable housing units, representing 20% of the 814 total residential units in the Project, consistent with MIH Option 2 (30% of residential floor area at an average of 80% of Area Median Income, or, as elected by the Borrower, 20% of units at a weighted average of 40% AMI pursuant to the Deep Affordability Option).
• No Pending Challenges. Based on our review of publicly available court records and our consultation with Hargrove & Linden, no pending zoning challenges, administrative appeals, or Article 78 proceedings have been identified with respect to the Project or the ULURP approvals.
• Zoning Opinion Confirmation. Hargrove & Linden has confirmed in the Zoning Opinion that, subject to the assumptions, qualifications, and exceptions set forth therein, the Project as currently designed may be constructed and operated as of right at the Project Site, in compliance with the ZR, subject to the special permits and authorizations obtained through the ULURP process described herein.
• Open Items. Certain items require resolution prior to the targeted Closing date of June 15, 2025, including: (i) execution and recording of the MIH regulatory agreement with HPD; (ii) confirmation of Chair certifications under the Special District provisions; (iii) DOB new building permit application status; (iv) recording of the restrictive declaration; (v) NYCEDC consent to the proposed financing; and (vi) delivery of the final form Zoning Opinion letter addressed to the Lenders and other required parties. These open items are described in detail in Section XI below.
III. Description of the Project Site
A. Location and Tax Lot Information
The Project Site is located at 450 West 34th Street, New York, New York 10001, in the Borough of Manhattan. The Project Site is comprised of the following four (4) tax lots:
The four tax lots have been assembled to form a single zoning lot for purposes of all bulk and use calculations under the ZR, pursuant to the zoning lot merger provisions of ZR § 12-10 and the lot merger declaration recorded at CRFN 2021000054381, NYC ACRIS, on March 15, 2021. The Zoning Opinion confirms that the lots are properly treated as a single zoning lot and that the merger documentation is in proper form and has been duly filed with DCP.
The Project Site is held pursuant to the Ground Lease between NYCEDC, as landlord, and MTDC, as tenant, dated June 1, 2020, and recorded at CRFN 2020000198762, NYC ACRIS. The Ground Lease has a term of ninety-nine (99) years, commencing June 1, 2020, with an option for one (1) additional twenty-five (25) year renewal term, subject to the terms and conditions set forth therein. The Ground Lease constitutes the Borrower's primary interest in the Project Site and is the basis for the leasehold mortgage to be granted to the Senior Lender.
B. Site Area and Lot Dimensions
The aggregate zoning lot area, as confirmed by the Survey and the Zoning Opinion, is approximately 63,500 square feet. The Project Site has frontage on the following streets:
• West 34th Street (south): approximately 250 linear feet of frontage;
• Eleventh Avenue (west): approximately 254 linear feet of frontage;
• West 35th Street (north): approximately 250 linear feet of frontage.
The eastern boundary of the zoning lot abuts the adjacent Lot 20 on Block 729, which is separately owned and not part of the Project. The Project Site is generally rectangular in configuration, with one irregular jog along the eastern lot line at the northeast corner attributable to the boundary of Lot 15. This irregularity is depicted on the Survey and does not materially affect the buildable area or bulk calculations.
The Survey identifies the following easements affecting the Project Site that are relevant to buildable area:
• A consolidated subsurface utility easement (10 feet in width) running along the West 34th Street frontage, in favor of Consolidated Edison Company of New York, Inc. (recorded at CRFN 2019000287443);
• A pedestrian access and circulation easement (15 feet in width) along the Eleventh Avenue frontage, established pursuant to the Special District public access requirements and the restrictive declaration to be recorded in connection with the ULURP approvals; and
• A below-grade transit infrastructure easement for MTA/NYCT No. 7 subway line ancillary facilities, as depicted on the Survey, encumbering approximately 2,100 square feet of the subsurface area beneath the southwestern portion of the Project Site.
None of these easements reduces the zoning lot area for purposes of bulk calculations under the ZR, although the transit infrastructure easement imposes certain structural and design constraints on the below-grade portions of the Project that have been accommodated in the current design.
C. Surrounding Context
The Project Site is located within the broader Hudson Yards development area on the far west side of Midtown Manhattan. The surrounding area has been subject to extensive redevelopment over the past two decades, driven by the 2005 rezoning that established the Special Hudson Yards District and the subsequent extension of the No. 7 subway line to the new 34th Street-Hudson Yards station, which opened in September 2015.
The Project Site is bounded by:
• To the south (across West 34th Street): the Jacob K. Javits Convention Center expansion and related commercial and hospitality uses;
• To the west (across Eleventh Avenue): the Western Rail Yards platform, which is the site of a major mixed-use development currently under construction pursuant to separate ULURP approvals;
• To the north (across West 35th Street): mid-rise commercial and light industrial buildings, several of which are subject to pending development applications;
• To the east: an existing 12-story commercial loft building (Lot 20, Block 729), currently occupied by office and showroom tenants.
The Project Site is approximately two blocks west of the Eastern Rail Yards development (Hudson Yards Phase I), which includes the completed towers at 10, 15, 30, 35, and 55 Hudson Yards, the Vessel public structure, and the Shops at Hudson Yards retail complex. The Project Site is approximately one block north of the 34th Street-Hudson Yards subway station (No. 7 line), providing direct subway access, and is within walking distance of Penn Station (approximately four blocks east), which serves Amtrak, NJ Transit, and Long Island Rail Road commuters.
The surrounding zoning districts include C6-4 (to the north and east within the Special District), M1-5 (to the west, across Eleventh Avenue, outside the Special District boundary in certain areas), and C2-8 (to the south, in portions of the Javits Center area). The Project Site's location within the Special Hudson Yards District Subdistrict A, Subarea A2, places it within the zone of highest-density development contemplated by the Special District plan.
IV. Zoning District Classification
A. C6-4 District — Overview
The Project Site is located within a C6-4 zoning district, which is among the highest-density commercial districts in the New York City zoning framework. The C6-4 district is a general central commercial district that permits a wide range of commercial, residential, community facility, and manufacturing uses consistent with a high-density, transit-oriented urban environment.
Under the ZR, the C6-4 district permits uses in Use Groups 1 through 12, encompassing the following categories relevant to the Project:
• Use Group 2 — Residential uses, including multi-family dwellings (the primary residential component of the Project);
• Use Group 3 — Community facility uses, including schools, libraries, museums, houses of worship, and government offices;
• Use Group 4 — Community facility uses, including ambulatory diagnostic or treatment health care facilities;
• Use Group 6A — Retail uses, including shops, department stores, and eating and drinking establishments;
• Use Group 6B — Office uses, including business and professional offices (the commercial office component of the Project);
• Use Group 6C — Retail uses, including certain larger-format retail establishments; and
• Use Groups 7 through 12 — Various commercial, amusement, and semi-industrial uses.
The Project's intended mixed-use program — comprising residential (Use Group 2), commercial office (Use Group 6B), retail (Use Groups 6A and 6C), and community facility (Use Groups 3 and 4) components — is confirmed by the Zoning Opinion to be permitted as of right within the C6-4 district, subject to the modifications and supplemental requirements imposed by the Special Hudson Yards District overlay, as discussed below.
The base (non-bonused) FAR for the C6-4 district is 10.0 for commercial and community facility uses and 10.0 for residential uses (when developed with qualifying affordable housing). The C6-4 district is a non-contextual district, meaning that there are no contextual height limits or other contextual restrictions applicable in the absence of a special district overlay. However, the Special District provisions impose additional height, setback, and massing controls that effectively supersede the default C6-4 sky exposure plane and tower regulations, as discussed in Section IV.C below.
B. Hudson Yards Special District Overlay
The Project Site is located within the Special Hudson Yards District, which was established by the City Council in 2005 through a comprehensive ULURP action and is codified in the ZR at Article IX, Chapter 3 (Sections 93-00 *et seq.*). The Special District encompasses approximately 45 blocks on the far west side of Manhattan, generally bounded by West 42nd Street to the north, West 28th Street to the south, Eighth Avenue to the east, and the Hudson River to the west.
The stated purposes of the Special Hudson Yards District, as set forth in ZR § 93-01, include:
1. Promoting the development of a mixed-use area of the highest density served by mass transit, including the No. 7 subway line extension;
2. Facilitating the construction of a platform over the MTA Long Island Rail Road storage yards and the development of such platform with a mix of residential, commercial, open space, and community facility uses;
3. Promoting housing, including affordable housing, within the district;
4. Providing for a coordinated program of public improvements, including parks, open spaces, streetscape enhancements, and transit connections; and
5. Establishing a financing mechanism (the District Improvement Bonus) to fund the infrastructure improvements necessary to support high-density development.
The Project Site falls within Subdistrict A (the Large-Scale Plan Subdistrict) and, more specifically, within Subarea A2 (the 34th Street Corridor). Subdistrict A is the area of the Special District designated for the highest-density development, centered on the Eastern and Western Rail Yards and the surrounding blocks. Subarea A2 encompasses the blocks along West 34th Street between Tenth and Eleventh Avenues and is intended for major mixed-use development that complements the rail yards platforms and leverages the proximity of the 34th Street-Hudson Yards subway station.
The Special District establishes a comprehensive regulatory framework that includes:
• District Improvement Bonus ("DIB"): A mechanism under ZR § 93-31 by which developers may obtain additional floor area beyond the base FAR by making contributions to the Hudson Yards Infrastructure Corporation ("HYIC"), a local development corporation established to finance public infrastructure improvements within the district. The DIB contributions fund improvements including subway extensions, parks, streets, sewers, and other infrastructure.
• Inclusionary Housing Bonus: An additional FAR bonus available to developments that include affordable housing units in compliance with the MIH program or the voluntary inclusionary housing program, as applicable.
• Development Coordination: Provisions requiring coordination among developers within the Special District to ensure consistency with the overall district plan, including phasing requirements, infrastructure delivery obligations, and public access commitments.
• Design and Urban Design Controls: Detailed regulations governing building form, streetwall requirements, ground-floor retail activation, pedestrian circulation, and the design of public open spaces.
C. Special District Modifications to Underlying C6-4
The Special Hudson Yards District rules supersede and supplement the underlying C6-4 bulk, use, and parking regulations in the following material respects:
Maximum FAR. The Special District establishes a maximum FAR of 18.0 for the Project Site (within Subdistrict A, Subarea A2), which exceeds the base C6-4 FAR of 10.0 by 8.0. This additional floor area is available through the DIB and inclusionary housing bonus mechanisms described above. The base FAR of 10.0 is available as of right; the additional 8.0 FAR (5.0 from DIB plus 3.0 from inclusionary housing bonus) is available upon satisfaction of the applicable requirements.
Height and Setback Controls. The Special District imposes its own height and setback regulations under ZR §§ 93-41 through 93-44, which replace the default C6-4 sky exposure plane and tower regulations. These include mandatory base heights (ranging from 60 to 150 feet, depending on the street and subarea), maximum building heights (which vary by subarea, with Subarea A2 permitting tower heights generally up to 800 feet, subject to CPC review for buildings exceeding certain thresholds), required setbacks above the streetwall, and tower lot coverage limitations.
Mandatory Streetwall and Ground-Floor Retail. The Special District requires the construction of a continuous streetwall along designated primary and secondary streets, with minimum and maximum streetwall heights and specific articulation standards. Along West 34th Street and Eleventh Avenue, the Project is subject to mandatory ground-floor retail use requirements under ZR § 93-14, which require that ground-floor street-facing space within the streetwall be occupied by retail or service uses within specified use groups.
Public Access Areas. The Special District requires the provision of publicly accessible open spaces, pedestrian connections, and through-block passageways, as applicable to the specific site. For the Project Site, the applicable requirements include a publicly accessible plaza along the Eleventh Avenue frontage and a widened sidewalk along West 34th Street, as set forth in the restrictive declaration.
Parking. The Special District modifies the underlying parking regulations to limit the amount of accessory parking permitted within the district, reflecting the area's high level of transit accessibility. The maximum number of accessory parking spaces for the Project is governed by ZR § 93-80 and the applicable special permit conditions, rather than the default C6-4 parking provisions.
The Zoning Opinion confirms that the Project as designed complies with all of these Special District modifications, subject to the special permits and authorizations obtained through the ULURP process.
V. Floor Area Ratio and Bulk Compliance
A. Maximum Permitted FAR
The maximum permitted FAR for the Project Site, as confirmed by the Zoning Opinion and our independent review of the applicable ZR provisions, is 18.0. This maximum FAR is derived from the following components:
With respect to the DIB, the Zoning Opinion confirms that MTDC has executed a DIB contribution agreement with HYIC, dated November 15, 2023, in the amount of approximately $62,500,000, payable in installments tied to construction milestones. The Zoning Opinion further confirms that the first installment payment of $15,625,000 was made on January 10, 2024, and that the remaining installments are current and not in default. The DIB contribution entitles the Project to an additional 5.0 FAR, representing approximately 317,500 square feet of bonus floor area.
With respect to the inclusionary housing bonus, the additional 3.0 FAR (approximately 190,500 square feet of bonus floor area) is available upon compliance with the MIH requirements described in Section VII below, including the provision of the requisite number of affordable housing units and the execution and recording of the MIH regulatory agreement with HPD.
B. Project FAR — As Designed
The Project as currently designed has a FAR of 8.83. Based on the zoning lot area of 63,500 square feet, the total zoning floor area ("ZFA") of the Project is calculated as follows:
Project FAR × Zoning Lot Area = Total ZFA
8.83 × 63,500 sq. ft. = 560,705 sq. ft. (approximate)
The ZFA is allocated among the Project's uses as follows:
In addition to the ZFA, the Project includes approximately 75,000 square feet of mechanical space, which is excluded from ZFA calculations pursuant to ZR § 12-10 (definition of "floor area"). Below-grade parking, loading berths, and building services areas are similarly excluded from ZFA in accordance with applicable ZR provisions.
A detailed floor area calculation worksheet, cross-referenced to the architectural plans prepared by Greaves Strategy Partners and the ZFA calculations set forth in the Zoning Opinion, is annexed hereto as Attachment E.
C. Unused Development Rights
The difference between the maximum permitted FAR and the Project FAR yields significant unused development rights on the zoning lot:
Maximum Permitted FAR — Project FAR = Unused FAR
18.0 − 8.83 = 9.17
The unused FAR corresponds to approximately 582,295 square feet of unused ZFA (9.17 × 63,500 sq. ft.). This represents a substantial reserve of development capacity that could, in principle, be utilized for future vertical or horizontal enlargement of the Project or, subject to applicable ZR provisions and Special District restrictions, transferred to other eligible receiving sites within the Special District.
However, the following restrictions on the disposition of unused development rights should be noted:
1. Ground Lease Restrictions. Section 7.04 of the Ground Lease provides that the Borrower may not transfer, sell, or otherwise dispose of unused development rights associated with the Project Site without the prior written consent of NYCEDC, which consent may be withheld in NYCEDC's reasonable discretion. Any such transfer is further conditioned upon compliance with the applicable provisions of the ZR and the Special District regulations, as well as NYCEDC's review and approval of the terms of any transfer agreement.
2. Special District Provisions. The transfer of unused development rights within the Special Hudson Yards District is governed by ZR § 93-32 and is generally limited to transfers within the same Subdistrict and Subarea, subject to CPC certification or authorization.
3. ULURP Conditions. The restrictive declaration recorded in connection with the ULURP approvals may impose additional limitations on the transfer or utilization of unused development rights, including phasing requirements and design consistency obligations.
For purposes of the Lenders' collateral analysis, the unused development rights represent a significant embedded value in the Project Site that is not being utilized by the current Project design. The deal team should coordinate with the appraisal team (Cushman & Wakefield) to confirm the treatment of unused development rights in the Project valuation.
D. Height and Setback
The applicable height and setback regulations for the Project Site are governed by the Special Hudson Yards District provisions at ZR §§ 93-41 through 93-44, rather than the default C6-4 sky exposure plane and tower regulations. The key parameters are as follows:
Base Height. The required base height (i.e., the mandatory streetwall height before any setback) along West 34th Street is a minimum of 80 feet and a maximum of 150 feet. Along Eleventh Avenue, the required base height is a minimum of 60 feet and a maximum of 120 feet. The Project's base rises to a height of 125 feet along West 34th Street and 110 feet along Eleventh Avenue, within the permitted ranges on both frontages.
Tower Setback. Above the base height, the building is required to set back a minimum of 10 feet from the West 34th Street streetwall and 15 feet from the Eleventh Avenue streetwall. The Project's tower element is set back 12 feet from the West 34th Street frontage and 15 feet from the Eleventh Avenue frontage, in compliance with these requirements.
Maximum Building Height. For Subarea A2, the maximum building height is governed by the applicable height limitation in ZR § 93-43, which permits a maximum tower height of 720 feet above the base plane (Manhattan datum) for lots in the Project Site's location. The Project's proposed maximum building height is 635 feet above the base plane (approximately 62 stories), which is within the permitted maximum. No CPC review for excessive height is triggered, as the 635-foot height falls below the 720-foot threshold applicable to this Subarea.
Tower Lot Coverage. The maximum tower lot coverage above the base height is 40% of the zoning lot area (approximately 25,400 square feet). The Project's tower floor plates average approximately 22,000 square feet above the base, representing tower lot coverage of approximately 34.6%, within the permitted maximum.
The Zoning Opinion confirms that the Project's height, setback, and massing comply with all applicable Special District regulations. No special permits or waivers for height or setback deviations have been obtained or are required.
E. Lot Coverage, Open Space, and Yards
The applicable lot coverage, open space, and yard requirements for the Project Site, as modified by the Special District, are as follows:
• Maximum Lot Coverage (base). The Special District does not impose a lot coverage maximum at the base level distinct from the streetwall requirements discussed above. The Project's base occupies approximately 90% of the zoning lot area, consistent with the mandatory streetwall and urban design requirements.
• Tower Lot Coverage. As noted above, maximum tower lot coverage above the base height is 40% of the zoning lot area. The Project complies.
• Yards. The C6-4 district, as modified by the Special District, does not require rear yards or side yards for commercial or mixed-use developments on through lots (lots with frontage on two parallel streets). The Project Site is a through lot with frontage on both West 34th Street and West 35th Street, and accordingly, no rear yard is required. The Zoning Opinion confirms that no side yard or rear yard deficiency exists.
• Open Space. The Special District requires the provision of publicly accessible open space on certain sites within the district. For the Project Site, the applicable requirement is the Eleventh Avenue public plaza, which is discussed in Section IX.E below. The open space requirement is not expressed as a lot-area ratio but rather as a specific design obligation set forth in the restrictive declaration and the ULURP conditions of approval.
The Zoning Opinion confirms that the Project complies with all applicable lot coverage, open space, and yard requirements.
VI. ULURP Approvals
A. Overview of the ULURP Process
The Uniform Land Use Review Procedure ("ULURP") is the public review process established under Sections 197-c and 197-d of the New York City Charter for certain categories of land use actions. ULURP applies to, among other actions, special permits, zoning map amendments, site selections for city facilities, acquisitions and dispositions of city-owned property, and certain other discretionary land use actions. The ULURP process involves sequential review by the affected Community Board, the Borough President, the City Planning Commission, and (for certain actions) the City Council, each within prescribed time periods.
The ULURP process is designed to ensure public participation and review of significant land use decisions. Each reviewing body has the opportunity to hold public hearings, receive testimony, and issue recommendations or binding determinations, as applicable. The CPC's approval of a ULURP application is a binding determination that, depending on the type of action, may be subject to City Council review and modification. Special permits granted by CPC under the ZR are subject to City Council call-up and review under Charter § 197-d(b)(2).
B. Application and Actions
The Project required ULURP approval for several discrete land use actions, which were consolidated in a single ULURP application:
ULURP Application No. C 230415 ZSM
The following land use actions were encompassed within the application:
1. Special Permit under ZR § 93-29 — A special permit for a large-scale general development within the Special Hudson Yards District, authorizing the distribution of total permitted floor area, open space, dwelling units, and other program elements without regard to zoning lot lines or other restrictions otherwise applicable to the individual lots comprising the Project Site, and authorizing modifications to the applicable height and setback, yard, and lot coverage regulations to facilitate the Project's integrated design.
2. Special Permit under ZR § 93-052 — A special permit for public parking garage use within the Special District, authorizing the construction and operation of a below-grade accessory parking facility containing not more than 225 public parking spaces, subject to the conditions and restrictions set forth in the CPC resolution.
3. Authorization under ZR § 93-06 — An authorization by the CPC Chair for a curb cut along West 35th Street to serve the Project's loading dock and parking garage entrance, which curb cut would otherwise not be permitted under the Special District's access and streetscape regulations.
4. Certification under ZR § 93-22(c) — A certification by the CPC Chair confirming that the Project's proposed floor area distribution, including the utilization of DIB and inclusionary housing bonus floor area, complies with the applicable Special District provisions.
For each of these actions, the Zoning Opinion confirms that the required approval, authorization, or certification has been duly obtained and remains in full force and effect, subject to the conditions of approval described in Section VI.E below.
C. Approval Timeline and Status
The chronological progression of the ULURP review for Application No. C 230415 ZSM is as follows:
The CPC resolution is annexed hereto as Attachment C and the City Council resolution is annexed hereto as Attachment D.
D. Finality and Expiration
Finality. The ULURP approvals for the Project are final and non-appealable. Under CPLR § 217, the statute of limitations for an Article 78 proceeding challenging a ULURP determination is four months from the filing of the determination with the City Clerk. The CPC determination was filed on September 14, 2023, and the City Council determination was filed on October 27, 2023. The four-month limitations period for challenging the CPC determination expired on January 14, 2024, and the four-month limitations period for challenging the City Council determination expired on February 27, 2024. We have confirmed, through a review of New York Supreme Court (New York County) records and consultation with Hargrove & Linden, that no Article 78 petition or other legal proceeding was filed challenging the ULURP approvals within the limitations period or at any time thereafter.
Expiration / Lapse. The special permits granted by CPC under the ULURP approvals are subject to the lapse provisions of ZR § 11-42(c), which provide that a special permit shall automatically lapse if substantial construction has not commenced within four (4) years of the effective date of the CPC approval, unless the CPC grants an extension. The effective date of the CPC approval is September 12, 2023; accordingly, the four-year substantial construction deadline is September 12, 2027.
The Project's target construction commencement date is June 15, 2025, which is more than two years before the September 12, 2027 deadline. The Borrower has represented to the deal team that foundation and substructure work is expected to begin promptly following Closing and the issuance of the DOB foundation permit. Provided that the Project achieves substantial construction commencement on or before September 12, 2027, the special permits will remain in full force and effect for the duration of the Project's construction and operation.
We note that the ZR does not define "substantial construction" with precision, and the determination of whether substantial construction has been achieved is made by CPC on a case-by-case basis. However, it is generally understood that the commencement of foundation work, including excavation and the installation of foundation elements, constitutes substantial construction for these purposes. The Borrower should be advised to maintain detailed construction records documenting the commencement and progress of foundation work.
E. Conditions of Approval
The CPC and City Council resolutions impose the following material conditions on the ULURP approvals, each of which requires ongoing compliance:
1. Design Review. The Borrower is required to submit final design drawings for the building exterior, ground-floor retail spaces, public access areas, and streetscape improvements to DCP for review and comment prior to the issuance of a building permit. The design review is administrative in nature (i.e., it does not require a further ULURP action) but must be completed to DCP's satisfaction. Status: Design submissions were made on January 22, 2025; DCP review is ongoing. Hargrove & Linden expects DCP design sign-off by May 15, 2025.
2. Restrictive Declaration. The Borrower is required to execute and record a restrictive declaration against the Project Site, in form and substance satisfactory to CPC and the City Council, establishing binding obligations with respect to phasing, design, infrastructure delivery, sustainability commitments, MIH compliance, and public access area maintenance. Status: The restrictive declaration is in final negotiation with DCP and the City Law Department. See Section VIII.C below for further discussion.
3. MIH Compliance. The Borrower is required to provide affordable housing units in compliance with the MIH program, as further described in Section VII below. Status: MIH regulatory agreement is in final negotiation with HPD. See Section VII.C below.
4. Infrastructure Obligations. The Borrower is required to complete certain infrastructure improvements, including streetscape improvements along West 34th Street and Eleventh Avenue, installation of new street trees and pedestrian lighting, and construction of the publicly accessible plaza along the Eleventh Avenue frontage, in accordance with a phasing schedule set forth in the restrictive declaration. Status: The phasing schedule has been agreed in principle; implementation is contingent on construction commencement.
5. Transit Connectivity. The Borrower is required to maintain and provide access to the below-grade MTA/NYCT easement area for transit infrastructure maintenance and to construct a below-grade pedestrian connection to the 34th Street-Hudson Yards station in accordance with specifications approved by MTA/NYCT. Status: Design specifications have been agreed with MTA/NYCT; construction will proceed concurrently with the Project's substructure work.
6. Local Hiring and MWBE Procurement. The City Council resolution includes commitments by the Borrower to use commercially reasonable efforts to achieve local hiring targets (30% of construction workforce from local community districts) and MWBE procurement goals (25% of construction contract value). Status: The Borrower has engaged a compliance consultant and established a local hiring office. These obligations are ongoing throughout construction.
7. Sustainability. The restrictive declaration includes a commitment to achieve LEED Gold certification (or equivalent) for the completed Project. Status: The Project is designed to meet LEED Gold standards; certification will be sought upon completion.
VII. Mandatory Inclusionary Housing Compliance
A. MIH Program Applicability
The Project Site is located within an area designated as a Mandatory Inclusionary Housing ("MIH") designated area pursuant to the ZR (Sections 23-90 et seq.) and the ULURP action that established the Special Hudson Yards District. MIH is a zoning requirement, applicable citywide in areas rezoned for residential use after March 22, 2016 (and in certain pre-existing special districts, including portions of the Special Hudson Yards District), that mandates the inclusion of permanently affordable housing in new residential developments.
Under ZR § 23-154(d), developments within MIH-designated areas that utilize residential floor area in excess of the applicable base FAR (or, in certain cases, that include any residential floor area) are required to provide a specified percentage of affordable housing units or floor area. The MIH program offers several compliance options, and the Borrower has elected to comply under the Deep Affordability Option (ZR § 23-154(d)(3)), which requires that 20% of residential floor area be provided as affordable housing at a weighted average income level of 40% of Area Median Income ("AMI").
The Zoning Opinion confirms that the MIH program is applicable to the Project and that the Borrower's election of the Deep Affordability Option is consistent with the ZR and the ULURP approvals.
B. Affordable Unit Requirements
The Project's residential component comprises a total of 814 dwelling units. Under the Deep Affordability Option, the Borrower is required to provide affordable housing units representing 20% of the total residential floor area. Based on the residential ZFA of 387,500 square feet, the required affordable floor area is approximately 77,500 square feet, corresponding to 163 affordable units as currently configured by the Borrower.
The affordable unit program is summarized as follows:
The weighted average income level across all 163 affordable units is approximately 40% AMI, in compliance with the Deep Affordability Option.
The MIH program and the ULURP conditions impose the following additional requirements with respect to the affordable units:
• Unit Size Distribution. The affordable units must include a mix of unit sizes (studios, one-bedrooms, two-bedrooms, and three-bedrooms) that is proportional to, or no less favorable than, the unit size distribution in the market-rate component of the Project. The Borrower's current unit mix includes 25% studios, 40% one-bedrooms, 25% two-bedrooms, and 10% three-bedrooms in both the affordable and market-rate components, which is in compliance.
• No-Cluster Rule. The affordable units may not be clustered on specific floors or in specific sections of the building. Under ZR § 23-96, the affordable units must be distributed across a range of floors and building sections such that no single contiguous group of floors contains more than 50% of the affordable units. The Borrower's unit distribution plan distributes affordable units across floors 3 through 55, with no clustering.
• Comparable Quality. The affordable units must be comparable in finish quality, access to common amenities, and building systems to the market-rate units, except to the extent permitted by the ZR and HPD regulations.
• Permanent Affordability. The affordability restrictions are permanent and must be reflected in a regulatory agreement recorded against the property.
A summary of the MIH unit distribution is annexed hereto as Attachment F.
C. Regulatory Agreement
The MIH compliance obligations are required to be memorialized in a regulatory agreement between HPD and the Borrower (and/or its affiliates), to be recorded against the Project Site as a covenant running with the land. The regulatory agreement establishes the permanent affordability restrictions, the income targeting, the unit distribution requirements, the monitoring and reporting obligations, and the enforcement mechanisms applicable to the affordable units.
The regulatory agreement is currently in final negotiation between the Borrower's counsel (Stearn & Halsey LLP) and HPD's Division of Housing Incentives. The parties have reached agreement on substantially all material terms, including the income bands, unit counts, and permanent affordability covenant. The remaining open points relate to administrative provisions, including the frequency of income recertification, the form of the annual compliance report, and certain indemnification provisions. The Borrower's counsel has represented that execution is expected by May 20, 2025, with recording anticipated within ten (10) business days thereafter.
The regulatory agreement must be executed and recorded prior to the issuance of the first temporary certificate of occupancy for any residential unit in the Project. However, the Senior Lender has required, as a condition to Closing, that either (a) the regulatory agreement be executed and recorded prior to Closing, or (b) the Borrower deliver an escrow deposit in the amount of $5,000,000 to Sentinel Title Insurance Company, as escrow agent, to secure the Borrower's obligation to cause the execution and recording of the regulatory agreement within sixty (60) days following Closing. The deal team should confirm the Senior Lender's preference and ensure that the appropriate mechanism is reflected in the loan documents.
D. Lender Considerations
The interaction between the MIH regulatory agreement and the Lenders' loan documents raises several important considerations:
1. Priority. The regulatory agreement will be recorded against the Project Site and will constitute an encumbrance on the Borrower's leasehold interest. The Senior Lender's leasehold mortgage will also be recorded against the Borrower's leasehold interest. The relative priority of the regulatory agreement and the mortgage must be addressed. Under standard MIH practice, HPD requires that the regulatory agreement be superior in priority to any mortgage lien. The Senior Lender's counsel (Clearfield & Associates LLP) and the Mezzanine Lender's counsel (Van Rees & Blackwell LLP, "VRB") should be advised of this requirement.
2. Subordination, Non-Disturbance, and Recognition Agreement ("SNDA"). The Lenders will require an SNDA or similar agreement from HPD, pursuant to which HPD agrees that, in the event of a foreclosure or other enforcement action by the Senior Lender, (a) the regulatory agreement will remain in effect and binding on any successor owner, (b) HPD will recognize the Lender (or any purchaser at a foreclosure sale) as the successor to the Borrower's obligations under the regulatory agreement, and (c) HPD will not terminate the regulatory agreement as a result of the foreclosure. HPD has a standard form SNDA that is typically acceptable to institutional lenders. The deal team should coordinate with Clearfield & Associates and VRB to obtain and negotiate the SNDA.
3. Transfer Restrictions. The regulatory agreement may include restrictions on the transfer of the Project (or the Borrower's interest therein) without HPD's prior consent. These restrictions must be reconciled with the transfer provisions in the Senior Mortgage Loan Agreement and the Mezzanine Loan Agreement, including the Lenders' rights to foreclose and take title (or assign to a purchaser).
4. Cash Flow Implications. The requirement to maintain 163 units at affordable rents (significantly below market) will affect the Project's net operating income and debt service coverage ratios. The deal team should confirm that the underwriting model properly accounts for the affordable unit rent levels and any applicable operating subsidies.
These lender-related issues should be flagged for review by Clearfield & Associates (Senior Lender's counsel) and VRB (Mezzanine Lender's counsel) at the earliest opportunity. The undersigned is available to coordinate with both firms on the zoning and MIH-related aspects of these issues.
VIII. Special Permits and Other Discretionary Approvals
A. Inventory of Special Permits
The following special permits have been obtained in connection with the Project through the ULURP process:
1. Large-Scale General Development Special Permit (ZR § 93-29). This special permit authorizes the development of the Project Site as a large-scale general development within the Special Hudson Yards District, permitting the distribution of floor area, open space, and other program elements across the assembled zoning lot without regard to internal lot lines. The special permit also authorizes modifications to the height and setback regulations, yard requirements, and lot coverage limitations that would otherwise apply to the individual tax lots comprising the zoning lot. The scope of the permitted modifications is set forth in the CPC resolution (Attachment C) and is reflected in the approved site plan and building envelope drawings that form part of the ULURP record.
2. Public Parking Garage Special Permit (ZR § 93-052). This special permit authorizes the construction and operation of a below-grade public parking facility containing not more than 225 parking spaces within the Project. The special permit was required because the Special District restricts the development of new parking facilities within the district and permits such facilities only upon a finding by CPC that the parking is necessary to serve the development and the surrounding area, and that it will not adversely affect traffic flow or pedestrian safety. The CPC resolution includes conditions limiting the hours of operation, requiring Transportation Demand Management ("TDM") measures, and requiring the Borrower to implement an electric vehicle charging infrastructure program (minimum 20% of spaces equipped with Level 2 or higher EV chargers).
Each of these special permits is subject to the conditions of approval described in Section VI.E above and the lapse provisions described in Section VI.D above. The Zoning Opinion confirms that both special permits are in full force and effect and have not been modified, revoked, or allowed to lapse.
B. Non-Discretionary Approvals and Certifications
In addition to the special permits obtained through ULURP, the Project requires the following non-discretionary approvals and certifications under the Special District provisions:
1. CPC Chair Certification of Floor Area Distribution (ZR § 93-22(c)). This certification confirms that the Project's utilization of DIB bonus and inclusionary housing bonus floor area complies with the applicable Special District provisions. The certification was issued by the CPC Chair on November 8, 2023, following the completion of the ULURP process and the verification of the DIB contribution agreement. A copy of the certification is on file with DCP.
2. CPC Chair Authorization for Curb Cut (ZR § 93-06). This authorization permits the curb cut on West 35th Street for the Project's loading dock and parking garage entrance. The authorization was issued concurrently with the CPC Chair certification on November 8, 2023.
3. DCP Director Certification of Phasing Compliance. Under the restrictive declaration, the DCP Director is required to issue a certification confirming that the Project's construction phasing plan complies with the phasing milestones set forth in the declaration. This certification has not yet been issued and is expected to be sought by the Borrower following the filing of the DOB new building permit application. The issuance of this certification is not a prerequisite to construction commencement but is required prior to the issuance of the first temporary certificate of occupancy for the Project. The deal team should monitor the status of this certification and confirm that it is obtained in due course.
C. Restrictive Declaration
In connection with the ULURP approvals, the Borrower is required to execute and record a restrictive declaration against the Project Site, in form and substance satisfactory to CPC, the City Council, and the City Law Department (Corporation Counsel). The restrictive declaration is a covenant running with the land that binds the Borrower and all successors and assigns to the material obligations imposed as conditions of the ULURP approvals.
The restrictive declaration addresses the following material obligations:
• Phasing. The declaration establishes milestones for the commencement and completion of the Project's construction phases, including the infrastructure improvements, the public access areas, and the affordable housing units. Failure to meet phasing milestones may trigger remedial obligations or, in extreme cases, permit the City to seek specific performance or injunctive relief.
• Design. The declaration incorporates the approved building design parameters, including the building envelope, streetwall configuration, ground-floor retail layout, and exterior materials palette, and requires that any material deviations from the approved design be submitted to DCP for review and comment.
• Infrastructure. The declaration obligates the Borrower to construct and maintain the streetscape improvements, sidewalk widenings, and below-grade transit connections required by the ULURP conditions.
• Sustainability. The declaration includes the Borrower's commitment to achieve LEED Gold certification (or equivalent) and to implement specified energy efficiency and stormwater management measures.
• MIH. The declaration cross-references the MIH regulatory agreement and incorporates the MIH compliance obligations as covenants running with the land.
• Public Access. The declaration requires the Borrower to construct, maintain, and make available to the public the Eleventh Avenue plaza and the widened West 34th Street sidewalk, in perpetuity, subject to reasonable closures for maintenance and repair.
The restrictive declaration is currently in final negotiation between the Borrower's counsel, DCP, and the City Law Department. The Borrower's counsel has represented that a final form is expected by May 10, 2025, with execution and recording anticipated by May 25, 2025, prior to the targeted Closing date.
Lender Considerations. The restrictive declaration will constitute a senior encumbrance on the Project Site, superior to the Lenders' mortgage and mezzanine liens. The Lenders' counsel (Clearfield & Associates and VRB) should review the final form of the restrictive declaration to confirm that: (a) the obligations imposed on the Borrower are consistent with the Borrower's representations and warranties in the loan documents; (b) the remedies available to the City in the event of a breach of the declaration do not impair the Lenders' collateral or enforcement rights; and (c) the declaration includes appropriate provisions permitting the Lenders (or any successor owner following foreclosure) to cure any defaults within reasonable cure periods. The undersigned is available to coordinate this review with lender's counsel.
IX. Other Land Use and Regulatory Considerations
A. Landmarks and Historic Preservation