1031-00004 · Hudson Yards West Mortgage LLC · Term Sheet Review

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CALDERWOOD & HARKNESS LLP

Attorneys at Law

One Liberty Plaza, 55th Floor New York, New York 10006

Telephone: (212) 455-7800 Facsimile: (212) 455-7801

www.calderwoodharkness.com

Writer's Direct Dial: (212) 455-7844 Writer's E-Mail: dfairchild@calderwoodharkness.com

March 10, 2025

Via E-Mail and Sundial Data Systems

Diane Castellano, Esq. Managing Partner Granite Peak Capital Partners, LP 9 West 57th Street, Suite 4200 New York, New York 10019

Victor Salinas Senior Vice President, Originations Granite Peak Capital Partners, LP 9 West 57th Street, Suite 4200 New York, New York 10019

Re: Mezzanine Loan Term Sheet dated March 7, 2025 — Hudson Yards West Development, 450 West 34th Street, New York, New York 10001; Mezzanine Loan in the Amount of $200,000,000; Borrower: Hudson Yards West Mezzanine LLC; Sponsor: Metropolitan Transit Development Corp. C&H Matter No. 1031-00004

Dear Diane and Victor:

We write on behalf of our client, Metropolitan Transit Development Corp. ("MTDC" or the "Sponsor"), and the borrower entities organized or to be organized in connection with the above-referenced transaction (collectively, the "Borrower Entities"), for which this Firm serves as outside real estate finance counsel. This letter relates to the proposed $200,000,000 mezzanine loan (the "Mezzanine Loan") to be made by Granite Peak Capital Partners, LP ("Granite Peak" or the "Mezzanine Lender") to Hudson Yards West Mezzanine LLC ("HYW Mezzanine" or the "Borrower") in connection with the development of the mixed-use project known as Hudson Yards West, located at 450 West 34th Street, New York, New York 10001 (the "Project").

We refer to the Mezzanine Loan Term Sheet dated March 7, 2025 (the "Term Sheet"), which has been executed by the parties. The purpose of this letter is to transmit MTDC's comments on and requested revisions to the Term Sheet, organized thematically. We have endeavored to be as specific as possible in our requests so that the parties may efficiently resolve open points and move toward the preparation and negotiation of definitive loan documentation.

As you are aware, parallel discussions are currently underway with Ironclad National Bank, N.A. ("Ironclad"), in its capacity as administrative agent for the syndicate of senior mortgage lenders, regarding the $475,000,000 senior mortgage loan (the "Senior Loan") and the related Intercreditor Agreement (the "ICA") to be entered into among Ironclad, Granite Peak, and the applicable Borrower Entities. We anticipate that a number of the points raised in this letter will require trilateral discussion involving Ironclad and its counsel.

We wish to express MTDC's appreciation for Granite Peak's collaborative approach throughout the term-sheet negotiation process. The parties have made meaningful progress, and MTDC is committed to resolving the remaining open points in an expeditious manner. Our shared objective remains a closing date of June 15, 2025, and the comments below are offered in furtherance of that timeline.

Our comments are set forth below.

I. YIELD MAINTENANCE AND PREPAYMENT PROVISIONS

A. Yield Maintenance Period — Request for Shortened Lockout

Section 6(a) of the Term Sheet, as executed, provides for a twenty-four (24) month hard lockout period on voluntary prepayment of the Mezzanine Loan, commencing on the closing date (the "Lockout Period"), followed by a yield-maintenance premium (the "Yield Maintenance Premium") applicable to any voluntary prepayment made after the expiration of the Lockout Period through the initial maturity date of September 15, 2029, calculated on the basis of the 11.50% per annum fixed coupon rate (the "Coupon Rate").

MTDC respectfully requests the following modifications to the prepayment framework:

(i) Reduction of Hard Lockout Period. The hard lockout on voluntary prepayment should be reduced from twenty-four (24) months to eighteen (18) months from the closing date. MTDC believes that eighteen months provides Granite Peak with a meaningful period of yield certainty while preserving the Sponsor's ability to respond to favorable market conditions or strategic refinancing opportunities that may arise earlier in the Project's development timeline.

(ii) Open Prepayment Window. The Yield Maintenance Premium should be eliminated during the final six (6) months preceding the initial maturity date — that is, the period from March 15, 2029 through June 15, 2029 — creating an open prepayment window (the "Open Window") during which the Borrower may repay the Mezzanine Loan in whole without payment of any premium or penalty, other than accrued and unpaid interest through the date of prepayment and any applicable exit fee (as discussed in Section IV.C below). For the avoidance of doubt, the Mezzanine Loan would continue to mature on September 15, 2029, and the Open Window would not affect the stated maturity date.

The commercial rationale for these requests is straightforward. The Project's construction schedule, as reflected in the construction budget and timeline approved by both Granite Peak and Ironclad, projects substantial completion of the core and shell by December 15, 2027, with the first Temporary Certificate of Occupancy ("TCO") anticipated by March 15, 2028. Following substantial completion and initial occupancy, MTDC intends to pursue permanent take-out financing or a capital-markets execution — potentially including a CMBS securitization, a private-placement note offering, or an institutional permanent loan — to retire both the Senior Loan and the Mezzanine Loan. The ability to retire the Mezzanine Loan during the Open Window without incurring a punitive yield-maintenance cost is essential to MTDC's capitalization strategy and will facilitate an orderly and timely exit from the construction-period financing.

We note that an eighteen-month lockout with a six-month open window prior to maturity is consistent with market practice for construction mezzanine facilities of comparable size and is, in fact, more protective of the mezzanine lender's yield than the structures seen in several recent comparable transactions in the New York City market.

B. Yield Maintenance Calculation Methodology

Section 6(b) of the Term Sheet references a "make-whole" calculation for the Yield Maintenance Premium based on the prevailing Treasury rate but does not specify the particular U.S. Treasury benchmark to be used or the discounting convention to be applied. MTDC believes it is important to address these definitional issues at the term-sheet stage to avoid protracted negotiation during the documentation phase.

MTDC requests that the definitive loan documents incorporate the following methodology for calculating the Yield Maintenance Premium:

(i) discount Rate. The discount rate used to calculate the present value of the remaining scheduled interest payments shall be the yield (as reported on Westmark Services Inc. or, if unavailable, the Federal Reserve Statistical Release H.15) on the U.S. Treasury security whose maturity date is closest to the initial maturity date of the Mezzanine Loan (September 15, 2029), as of the second business day preceding the date of prepayment. In the event that two U.S. Treasury securities have maturity dates equally close to the initial maturity date, the security with the lower yield shall be used.

(ii) discounting Convention. The make-whole amount shall be calculated on a present-value basis using semiannual discounting and a 30/360 day-count convention, which is consistent with the quotation conventions for U.S. Treasury securities and eliminates potential ambiguity arising from alternative day-count methods.

(iii) Elimination of Premium Floor. Section 6(b) of the Term Sheet references a minimum prepayment premium or "floor" of 1.0% of the then-outstanding principal balance of the Mezzanine Loan. MTDC requests that this floor be deleted in its entirety. The yield-maintenance formula itself is specifically designed to compensate the Mezzanine Lender for the economic loss arising from early repayment by discounting the remaining interest stream at the applicable Treasury rate. A minimum premium floor layered on top of the make-whole calculation results in an overcompensation to the Mezzanine Lender and is, in MTDC's view, inappropriate for a construction mezzanine facility where the underlying asset is in a development stage and the risk profile decreases materially as the Project approaches stabilization. We note that yield-maintenance floors are more commonly associated with stabilized, permanent mezzanine debt, and we do not believe such a floor is warranted here.

C. Partial Prepayment

The Term Sheet, as executed, is silent on the subject of partial voluntary prepayment of the Mezzanine Loan. MTDC requests that the definitive loan documents include an express right of partial prepayment, subject to the following parameters:

(i) Minimum Increment. Each partial prepayment shall be in a minimum amount of $10,000,000 (or, if less, the entire remaining outstanding principal balance of the Mezzanine Loan).

(ii) Timing. Partial prepayments shall be permitted only after the expiration of the Lockout Period (as reduced to eighteen (18) months per Section I.A above).

(iii) No Yield Maintenance Premium. Partial prepayments made in compliance with the conditions set forth in this paragraph shall not be subject to the Yield Maintenance Premium.

(iv) Conditions to Partial Prepayment. The right to make partial prepayments without Yield Maintenance Premium shall be conditioned upon the Borrower's demonstration, through an officer's certificate delivered to Granite Peak not less than ten (10) business days prior to the proposed prepayment date, that, on a pro forma basis after giving effect to such partial prepayment: (a) the combined loan-to-value ratio (the "Combined LTV"), calculated using an appraisal obtained within twelve (12) months prior to the date of such prepayment (or, if more recently available, the most recent appraisal obtained in connection with a Senior Loan draw request), does not exceed 65.85%; and (b) the combined debt service coverage ratio (the "Combined DSCR"), calculated on the basis of in-place net operating income for the trailing twelve-month period (or, if the Project has not yet achieved twelve months of operating history, on the basis of annualized net operating income for the most recent calendar quarter), is not less than 1.20x.

(v) Application of Partial Prepayments. Partial prepayments shall be applied in inverse order of maturity (i.e., to the last scheduled installments of principal first), unless otherwise agreed by the parties.

The right of partial prepayment is an important element of MTDC's capital management strategy and provides meaningful flexibility to reduce the Mezzanine Loan balance as the Project generates cash flow and the Sponsor obtains access to additional permanent capital sources.

D. Mandatory Prepayment from Excess Cash Flow

MTDC acknowledges the Term Sheet's provision, set forth in Section 6(d), requiring a mandatory prepayment sweep of fifty percent (50%) of Excess Cash Flow (as defined in the Term Sheet) following Project stabilization (the "Cash Sweep"). MTDC has the following comments and requests regarding the Cash Sweep mechanics:

(i) Reduction of Sweep Percentage. MTDC requests that the Cash Sweep percentage be reduced from fifty percent (50%) to twenty-five percent (25%) of Excess Cash Flow. A twenty-five percent sweep provides Granite Peak with meaningful deleveraging while preserving adequate cash flow for the Sponsor to fund tenant improvement obligations, leasing commissions, capital expenditures, and other Project-level costs that are essential to maintaining and increasing the value of the collateral securing both the Senior Loan and the Mezzanine Loan. We note that a fifty percent sweep is aggressive relative to market norms for construction mezzanine facilities and could, paradoxically, impair the Project's ability to achieve and sustain stabilization by diverting funds that would otherwise be available for leasing and operational purposes.

(ii) Commencement Trigger. The Cash Sweep should not commence until the Project has achieved eighty-five percent (85%) economic occupancy (i.e., tenants in occupancy and paying rent, including tenants in a free-rent period to the extent such free-rent period is consistent with the approved leasing guidelines) for two (2) consecutive calendar quarters. This threshold is consistent with the leasing threshold deadline of September 15, 2029 set forth in the Term Sheet and ensures that the Cash Sweep does not commence prematurely — that is, before the Project has demonstrated a sustainable income stream sufficient to support ongoing operations, debt service, and the required capital reserves.

(iii) No Yield Maintenance Premium on Sweep Prepayments. Mandatory prepayments resulting from the Cash Sweep should be applied without any Yield Maintenance Premium, exit fee, or other penalty. Because the Cash Sweep is a mandatory (not voluntary) prepayment obligation, imposing a yield-maintenance cost on such payments would effectively penalize the Borrower for the Project's success, which is a result that neither party intends.

II. MEZZANINE LENDER CURE RIGHTS

A. Scope of Cure Rights

MTDC supports Granite Peak's right to cure defaults under the Senior Loan in the context of the Intercreditor Agreement, and MTDC recognizes that robust cure rights are an integral component of the mezzanine lender's credit protection. However, MTDC requests that the cure-rights provisions be reciprocal in nature and appropriately bounded, so as to provide Granite Peak with a meaningful opportunity to protect its position without creating uncapped or open-ended obligations that could have unintended consequences for the capital structure. The specific parameters that MTDC requests are as follows:

1. Monetary Default Cure Period. Granite Peak should have a cure period of ten (10) business days following receipt of written notice from Ironclad (in its capacity as administrative agent for the senior mortgage lenders) to cure any monetary default under the Senior Loan documents. This ten (10) business day cure period is designed to be consistent with, and supplementary to, the five (5) business day cure period afforded to HYW Mortgage LLC ("HYW Mortgage"), the senior mortgage borrower, under the Senior Loan Agreement. The additional five (5) business days provide Granite Peak with a reasonable additional window in which to (a) receive and process the default notice from Ironclad, (b) evaluate the nature and amount of the monetary default, (c) coordinate with MTDC and the Borrower regarding the source and timing of funds, and (d) effectuate the cure payment. MTDC notes that the ten-business-day mezzanine cure period for monetary defaults is a well-established market standard in New York City construction finance intercreditor agreements and should not be controversial.

2. Non-Monetary Default Cure Period. Granite Peak should have a cure period of thirty (30) days following receipt of written notice from Ironclad to cure (or to commence cure of) any non-monetary default under the Senior Loan documents. Non-monetary defaults may encompass a wide range of circumstances — including breaches of operating covenants, zoning compliance issues, environmental matters, insurance lapses, and failures to deliver required reports or certifications — many of which require investigation, analysis, and coordination among multiple parties before a cure can be implemented. Accordingly, MTDC requests that the thirty (30) day cure period be subject to a reasonable extension of an additional sixty (60) days (for an aggregate non-monetary cure period of up to ninety (90) days) if the non-monetary default is of a nature that cannot reasonably be cured within the initial thirty (30) day period and Granite Peak is diligently pursuing such cure. The determination of whether Granite Peak is "diligently pursuing" cure should be based on an objective standard and should take into account the nature of the default, the actions required to effectuate cure, and any third-party approvals or governmental actions that may be necessary.

3. Limitation on Cure Obligation. MTDC requests that the Intercreditor Agreement include a monetary cap on any single cure payment or advance by Granite Peak. Specifically, no single cure by Granite Peak should obligate Granite Peak to advance more than $20,000,000 without Granite Peak's express prior written consent. This cap is intended to prevent the intercreditor mechanics from operating as a de facto unconsented capital call on the Mezzanine Lender, which could have adverse consequences for Granite Peak's own fund-level liquidity and portfolio management. MTDC believes that a $20,000,000 cap per cure event provides ample room for Granite Peak to address the vast majority of potential monetary defaults while ensuring that any cure obligation of extraordinary magnitude is subject to a deliberate decision by Granite Peak's investment committee. The parties may wish to discuss whether the cap should be measured on a per-cure-event basis, a rolling twelve-month aggregate basis, or both, and MTDC is prepared to engage constructively on the appropriate structure.

4. No Waiver of Mezzanine Borrower Obligations. For the avoidance of doubt, MTDC requests that the Intercreditor Agreement and the Mezzanine Loan documents expressly provide that any exercise or non-exercise of cure rights by Granite Peak does not release, waive, or otherwise affect the obligations of HYW Mezzanine or MTDC under the Mezzanine Loan documents. The cure-rights provisions are intended to protect the Mezzanine Lender's position in the capital structure and to preserve the Project as a going concern; they are not intended to shift the underlying repayment obligation or any other Borrower or Sponsor covenant to the Mezzanine Lender. Any amounts advanced by Granite Peak in connection with a cure should be added to the outstanding principal balance of the Mezzanine Loan (or, at Granite Peak's election, treated as a protective advance bearing interest at the default rate under the Mezzanine Loan), and the Borrower and Sponsor should remain fully liable for all such amounts.

B. Purchase Option

Section 8(c) of the Term Sheet grants Granite Peak an option to purchase the Senior Loan at par (plus accrued and unpaid interest, fees, and expenses) upon the occurrence and during the continuance of an Event of Default under the Senior Loan (the "Purchase Option"). MTDC acknowledges the importance of the Purchase Option to Granite Peak's investment thesis and supports the inclusion of this right in the Intercreditor Agreement. However, MTDC requests the following modifications and clarifications to the Purchase Option:

(i) Expanded Trigger Events. The Purchase Option should be triggered not only by the occurrence and continuance of an Event of Default under the Senior Loan (as currently provided), but also by (a) any acceleration of the Senior Loan by Ironclad, and (b) the commencement of any enforcement action by Ironclad against HYW Mortgage's assets, including without limitation any UCC foreclosure on the Senior Loan collateral, any exercise of power of sale under the mortgage, or any application for the appointment of a receiver. These expanded trigger events are essential because, in practice, the occurrence of an Event of Default alone may not provide Granite Peak with sufficient notice or urgency to exercise the Purchase Option before Ironclad takes actions that could destroy the value of Granite Peak's mezzanine position.

(ii) Minimum Exercise Window. The Purchase Option exercise period should be not less than sixty (60) days from the date of the applicable trigger event. The sixty-day window is necessary to allow Granite Peak adequate time to (a) evaluate the status of the Senior Loan and the Project, (b) conduct any additional due diligence that may be required, (c) arrange financing for the purchase of the Senior Loan (which, at a principal amount of up to $475,000,000, represents a significant capital commitment), and (d) negotiate and execute the assignment and assumption documentation with Ironclad. A shorter exercise window would, as a practical matter, render the Purchase Option illusory, particularly in a distressed scenario where information flow may be impaired and transaction execution may be more complex.

We note that the Purchase Option is a critical intercreditor point that will need to be negotiated trilaterally with Ironclad and its counsel at Clearfield & Associates LLP (Harrison Whitmore). MTDC expects that Ironclad will have views on the scope and mechanics of the Purchase Option, and we believe it is advisable to address these issues early in the intercreditor negotiation process to avoid delays in the overall transaction timeline.

C. Subordination Mechanics

MTDC acknowledges and expects that the Intercreditor Agreement will provide for subordination of the Mezzanine Loan to the Senior Loan on both a payment basis and a lien basis, consistent with the structural subordination inherent in the mezzanine position. However, MTDC requests that the subordination provisions include a "standstill" concept (the "Standstill Period") designed to provide an orderly framework for the resolution of defaults and enforcement actions. Specifically, MTDC requests the following:

(i) Upon the occurrence of an Event of Default under the Senior Loan that gives rise to a right on the part of Ironclad to exercise remedies against HYW Mezzanine's pledged equity interests in HYW Mortgage (or against any other collateral securing the Mezzanine Loan), Ironclad shall provide written notice to Granite Peak of its intent to exercise such remedies.

(ii) For a period of one hundred eighty (180) days following delivery of such notice (the "Standstill Period"), Ironclad shall not exercise any remedies against HYW Mezzanine's pledged equity interests or against any other collateral securing the Mezzanine Loan, provided that nothing in the Standstill Period shall restrict Ironclad's right to exercise remedies directly against HYW Mortgage or the Project-level collateral securing the Senior Loan.

(iii) During the Standstill Period, Granite Peak may exercise its cure rights under the Intercreditor Agreement, negotiate a workout or restructuring with Ironclad, exercise the Purchase Option, or take such other actions as Granite Peak deems appropriate to protect and preserve the value of the mezzanine position.

(iv) Upon expiration of the Standstill Period, if the applicable Event of Default has not been cured and the Purchase Option has not been exercised, Ironclad shall be free to exercise all remedies available to it under the Intercreditor Agreement and applicable law.

MTDC views the Standstill Period as essential to preserving the value of the mezzanine position and, equally importantly, to preserving the value of the Project as a going concern. The one hundred eighty (180) day duration of the Standstill Period is necessary to provide Granite Peak with a realistic opportunity to evaluate alternatives and marshal resources. A rushed enforcement process that does not afford the Mezzanine Lender adequate time to act would likely result in value destruction for all parties — including the senior lenders — and is inconsistent with the orderly resolution of distressed construction-stage assets.

III. INTERCREDITOR AGREEMENT — ADDITIONAL NEGOTIATION POINTS

In addition to the cure-rights, purchase-option, and subordination provisions discussed in Section II above, MTDC has the following comments and requests with respect to the Intercreditor Agreement.

A. Consent Rights over Senior Loan Modifications

MTDC requests that the Intercreditor Agreement include a provision requiring Ironclad to obtain Granite Peak's prior written consent (such consent not to be unreasonably withheld, conditioned, or delayed) before agreeing to any modification, amendment, waiver, or supplement of the Senior Loan documents that would have a material adverse effect on the Mezzanine Lender's position. Without limiting the generality of the foregoing, Granite Peak's prior written consent should be required for any modification that would:

(i) increase the principal amount of the Senior Loan above $475,000,000, whether through an increase in commitments, the addition of protective advances, or otherwise (other than protective advances by Ironclad not exceeding $5,000,000 in the aggregate);

(ii) increase the interest rate, default rate, or fees payable under the Senior Loan documents;

(iii) shorten the stated maturity date of the Senior Loan or accelerate any scheduled amortization payments;

(iv) modify the cash management, lockbox, or waterfall provisions in a manner that would reduce or delay distributions to the Mezzanine Lender or the Borrower Entities; or

(v) release, subordinate, or impair any collateral securing the Senior Loan (including the mortgage lien on the Project), other than releases of immaterial personal property in the ordinary course of business.

These consent rights are fundamental to the Mezzanine Lender's ability to monitor and protect its investment. Modifications to the Senior Loan that increase the senior debt burden, alter the economic terms, or impair the collateral pool have a direct and potentially significant impact on the recovery available to the Mezzanine Lender in a distressed scenario, and Granite Peak should have the opportunity to evaluate and consent to any such changes before they become effective.

B. Casualty and Condemnation Proceeds

Section 9 of the Term Sheet provides that insurance proceeds and condemnation awards relating to the Project shall be applied entirely to the Senior Loan. MTDC objects to this provision and requests the following alternative framework:

(i) Restoration Priority. Insurance proceeds and condemnation awards shall be applied first to the restoration of the Project, subject to customary feasibility conditions, including (a) the availability of sufficient proceeds (together with any additional funds committed by the Sponsor) to complete restoration, (b) the ability to complete restoration within a commercially reasonable timeframe, and (c) the absence of any uncured Event of Default under the Senior Loan or the Mezzanine Loan that has resulted in an acceleration of either loan.

(ii) Distribution of Excess Proceeds. In the event that insurance proceeds or condemnation awards remain after the completion of restoration (or if restoration is not feasible under the standards described above), such excess proceeds shall be applied to repayment of the Senior Loan and the Mezzanine Loan on a pro rata basis based on the respective outstanding principal balances of the Senior Loan and the Mezzanine Loan as of the date of distribution, rather than entirely to the Senior Loan as stated in the Term Sheet.

The pro rata sharing of excess casualty and condemnation proceeds is a matter of fundamental fairness to the Mezzanine Lender. Where a casualty or condemnation event renders the Project incapable of restoration (or where proceeds exceed restoration costs), the resulting diminution in value affects the Mezzanine Lender's collateral position at least as significantly as it affects the senior lender's position, and a pro rata sharing of proceeds is the most equitable outcome. We acknowledge that this point may require negotiation with Ironclad and its counsel, and we are prepared to discuss alternative structures, including a "first dollar" allocation to the Senior Loan up to a specified threshold, if that would facilitate agreement.

C. Reserve Accounts and Cash Management

Section 10 of the Term Sheet contemplates that Ironclad, as the senior lender, will control all reserve accounts (including the interest reserve, tax and insurance escrow, replacement reserve, tenant improvement and leasing commission reserve, and completion guaranty reserve) and the lockbox account through which all Project revenues and disbursements will flow. MTDC does not object to Ironclad's control over reserve accounts and the lockbox during the construction period, when Ironclad is actively overseeing construction draws, budget compliance, and milestone verification.

However, MTDC requests the following provisions applicable after the conversion of the Senior Loan from the construction phase to the permanent phase, which is projected to occur following the issuance of the first TCO (anticipated March 15, 2028):

(i) Monthly Reporting. Following the conversion to the permanent phase, Ironclad shall provide Granite Peak with monthly reports on all reserve and cash management accounts, including (a) beginning and ending balances for each account, (b) all deposits into and disbursements from each account during the reporting period, (c) a reconciliation of actual disbursements against budgeted amounts, and (d) a summary of any pending draw requests or anticipated disbursements. Such reports shall be delivered within fifteen (15) business days following the end of each calendar month.

(ii) Notice of Large Disbursements. Any release of funds from reserve accounts in excess of $2,000,000 in any single disbursement (or series of related disbursements) during the permanent phase shall require Ironclad to provide not less than five (5) business days' prior written notice to Granite Peak, setting forth the amount, purpose, and payee of such disbursement. For the avoidance of doubt, this notice requirement is informational only and does not constitute a consent right on the part of Granite Peak; Ironclad shall retain sole discretion over reserve disbursements in accordance with the terms of the Senior Loan documents.

These reporting and notice provisions will enable Granite Peak to maintain appropriate oversight of the Project's financial operations during the permanent phase without interfering with Ironclad's administrative control over the reserve and cash management architecture.

D. Bankruptcy-Related Provisions

MTDC requests that the Intercreditor Agreement include standard provisions addressing the rights of the Mezzanine Lender in the context of a bankruptcy proceeding or UCC disposition, as follows:

(i) Credit Bidding. Granite Peak shall have the right to credit bid up to the full amount of the outstanding Mezzanine Loan (including accrued and unpaid interest, fees, and expenses) in any bankruptcy sale (whether under Section 363 of the Bankruptcy Code or pursuant to a plan of reorganization) or UCC disposition of the collateral securing the Senior Loan or the Mezzanine Loan.

(ii) Proof of Claim. Granite Peak shall have the right to file a proof of claim in any bankruptcy proceeding involving HYW Mortgage, HYW Mezzanine, or any other Borrower Entity, and Ironclad shall not object to or seek to disallow any such proof of claim on the grounds of subordination or any other theory.

(iii) Standing as Party in Interest. Ironclad shall waive the right to object to Granite Peak's standing as a party in interest in any bankruptcy proceeding involving HYW Mortgage, HYW Mezzanine, or any other Borrower Entity, and shall not seek to limit Granite Peak's participation in such proceeding on the grounds of subordination or any other theory, provided that Granite Peak's rights in such proceeding remain subject to the payment and lien subordination provisions of the Intercreditor Agreement.

These bankruptcy-related provisions are standard in intercreditor agreements for mezzanine construction facilities in the New York market and are essential to preserving Granite Peak's ability to protect its investment in a distressed scenario. MTDC expects that Ironclad's counsel will be familiar with these provisions and that they should not be a significant point of contention in the intercreditor negotiation.

IV. ADDITIONAL TERM-SHEET COMMENTS

A. Mezzanine Loan Interest Rate

MTDC confirms its acceptance of the fixed interest rate of 11.50% per annum, as set forth in Section 3 of the Term Sheet. No further comment is required on this point.

B. Origination Fee

MTDC confirms its acceptance of the origination fee of 1.50% of the Mezzanine Loan commitment amount, equal to $3,000,000, payable to Granite Peak at closing out of Mezzanine Loan proceeds. No further comment is required on this point.

C. Exit Fee

Section 5 of the Term Sheet provides for an exit fee of 0.50% of the outstanding principal balance of the Mezzanine Loan at the time of repayment or maturity (the "Exit Fee"). MTDC requests that the Exit Fee be waived — that is, reduced to zero — in the event that the Mezzanine Loan is repaid in full on or prior to the initial maturity date of September 15, 2029. The Exit Fee should apply only to repayments that occur during any extension period following the initial maturity date.

The rationale for this request is that the Exit Fee, when combined with the Yield Maintenance Premium (or, during the Open Window, the absence thereof), results in an excessive aggregate cost of prepayment that is not commensurate with the risk profile of a construction mezzanine facility. MTDC believes that if the Borrower repays the Mezzanine Loan in full by the initial maturity date — thereby eliminating any extension risk for the Mezzanine Lender — the origination fee, the Coupon Rate, and (to the extent applicable) the Yield Maintenance Premium provide Granite Peak with a fully adequate return on its investment, and the imposition of an additional Exit Fee is not warranted. The Exit Fee should be reserved for situations in which the Borrower exercises an extension option and thereby requires Granite Peak to maintain its capital commitment beyond the initial maturity date.

D. Extension Options

Section 11 of the Term Sheet references two (2) one-year extension options (each, an "Extension Option"), permitting the Borrower to extend the maturity date of the Mezzanine Loan from September 15, 2029 to September 15, 2030 (first extension) and from September 15, 2030 to September 15, 2031 (second extension), subject to certain conditions. MTDC requests the following with respect to the Extension Options:

The conditions to the exercise of each Extension Option should be limited to the following:

(i) no Event of Default shall have occurred and be continuing under the Mezzanine Loan documents or, to the Borrower's knowledge, under the Senior Loan documents;

(ii) the Borrower shall have paid to Granite Peak an extension fee equal to 0.25% of the then-outstanding principal balance of the Mezzanine Loan, payable on the effective date of each extension;

(iii) the Combined DSCR, calculated on the basis of in-place net operating income for the trailing twelve-month period, shall be not less than 1.20x; and

(iv) the combined debt yield (calculated as in-place net operating income divided by the combined outstanding principal balances of the Senior Loan and the Mezzanine Loan) shall be not less than 8.0%.

MTDC requests the deletion of the additional extension condition set forth in Section 11(e) of the Term Sheet, which requires the Project to have achieved eighty-five percent (85%) economic occupancy as a prerequisite to the exercise of each Extension Option. This occupancy threshold is duplicative and unnecessary for the following reasons: (a) the leasing threshold deadline of September 15, 2029, which is the initial maturity date of the Mezzanine Loan, already provides a mechanism for evaluating the Project's leasing performance at the time the Borrower would first be seeking an extension; (b) the Combined DSCR and debt yield conditions described above are financial performance metrics that inherently reflect the Project's occupancy level, as projects that fail to achieve adequate occupancy will not meet the required DSCR and debt yield thresholds; and (c) the Cash Sweep trigger (DSCR below 1.10x) provides an additional mechanism for deleveraging the Mezzanine Loan in the event of underperformance, reducing the extension-period risk to the Mezzanine Lender. Imposing a separate occupancy test on top of these financial performance conditions creates the risk of a "false negative" — a scenario in which the Project is generating robust cash flow and meeting all financial covenants but is technically ineligible for extension due to a transient dip in occupancy arising from, for example, a large lease expiration that is in the process of being re-tenanted.

E. Representations and Warranties — SPE Status

MTDC intends to cause Hudson Yards West Mezzanine LLC to be formed as a single-purpose Delaware limited liability company with customary separateness covenants, including restrictions on (a) engaging in any business other than owning its equity interest in HYW Mortgage and activities incidental thereto, (b) incurring any indebtedness other than the Mezzanine Loan and trade payables in the ordinary course, (c) acquiring any assets other than its equity interest in HYW Mortgage, (d) merging, consolidating, or dissolving, (e) commingling funds or assets with any affiliate, and (f) holding itself out as other than a separate and distinct entity.

MTDC confirms its willingness to include an independent director (or independent manager, as applicable under Delaware law) requirement in the organizational documents of HYW Mezzanine. In addition, this Firm is prepared to deliver a reasoned, non-consolidation opinion at closing, opining that, subject to customary assumptions, qualifications, and limitations, in the event of a bankruptcy filing by MTDC or any affiliate, a court would not substantively consolidate the assets and liabilities of HYW Mezzanine with those of the filing entity.

MTDC acknowledges that Granite Peak may require a limited recourse guaranty from MTDC (a "Bad Boy Guaranty") covering SPE violations and certain other non-recourse carve-out events. MTDC is prepared to negotiate the specific carve-out triggers and the scope of the Sponsor's recourse liability in the context of the definitive loan documents. MTDC expects that the carve-out triggers will be limited to actions within the Sponsor's control (such as voluntary bankruptcy filings, fraud, misapplication of funds, and intentional waste) and will not include events that are beyond the Sponsor's reasonable control or that are more appropriately addressed through loan-level defaults and remedies.

F. Reporting Requirements

MTDC accepts the following reporting requirements as set forth in the Term Sheet:

(i) Quarterly Financial Reporting. Unaudited quarterly financial statements (including balance sheet, income statement, and cash flow statement) for HYW Mezzanine and the Project, delivered to Granite Peak within forty-five (45) days after the end of each fiscal quarter.

(ii) Annual Audited Financial Statements. Audited annual financial statements for HYW Mezzanine and the Project, prepared in accordance with GAAP and audited by Whitfield Albrecht & Co. LLP (or such other nationally recognized accounting firm as may be reasonably acceptable to Granite Peak), delivered to Granite Peak within one hundred twenty (120) days after the end of each fiscal year.

With respect to monthly construction draw reports, MTDC requests that the obligation to prepare and distribute such reports be allocated to Ironclad, in its capacity as the party controlling construction disbursements under the Senior Loan. Ironclad will be overseeing all construction draws, reviewing draw requests, engaging the construction consultant, and verifying construction progress — and is therefore in the best position to prepare accurate and timely construction draw reports. MTDC requests that the Senior Loan documents or the Intercreditor Agreement include a requirement that Ironclad provide copies of all monthly construction draw reports to Granite Peak concurrently with their distribution to HYW Mortgage and the construction consultant.

V. PROCESS AND NEXT STEPS

In light of the foregoing, MTDC respectfully requests a meeting — either in person at a mutually convenient location or by video conference — during the week of March 17, 2025 to discuss the comments set forth in this letter. MTDC proposes that representatives of Ironclad and Clearfield & Associates LLP (Harrison Whitmore) be invited to participate in the portion of the discussion addressing intercreditor issues, including the cure rights, purchase option, standstill period, consent rights over senior loan modifications, casualty and condemnation proceeds, reserve account reporting, and bankruptcy-related provisions discussed in Sections II and III above. We believe that early engagement with the senior lender on these topics will significantly reduce the risk of delays in the intercreditor negotiation and contribute to maintaining the overall transaction timeline.

A revised, marked-up version of the Term Sheet reflecting the changes requested herein is enclosed with this letter for your reference. The redline has been prepared against the executed version of the Term Sheet dated March 7, 2025 and identifies each proposed modification with a brief explanatory annotation.

MTDC requests that Granite Peak and its counsel, Voss Richter & Baines LLP (Natasha Ivanovic), review the foregoing comments and the enclosed redline and circulate any counter-comments or responses by March 21, 2025. Adhering to this response timeline is important in order to maintain the target first-draft distribution date of May 1, 2025 for the definitive Mezzanine Loan documents, including the Mezzanine Loan Agreement, the Mezzanine Note, the Pledge and Security Agreement, the Mezzanine Environmental Indemnity Agreement, the Bad Boy Guaranty, and the Intercreditor Agreement. Timely distribution of first drafts by May 1, 2025 is, in turn, essential to achieving the parties' shared target closing date of June 15, 2025.

VI. RESERVATION OF RIGHTS

Nothing in this letter shall constitute, or shall be deemed to constitute, a waiver, modification, or amendment of the Term Sheet or any of the rights, remedies, or obligations of any party thereunder, except to the extent expressly agreed in writing by all parties to the Term Sheet. MTDC and the Borrower Entities expressly reserve all of their respective rights, remedies, and defenses under the Term Sheet, under applicable law, and in equity, and no failure or delay on the part of MTDC or any Borrower Entity to exercise any such right, remedy, or defense shall operate as a waiver thereof.

The comments and requests set forth in this letter are for discussion purposes only and are subject to (i) formal approval by the Board of Directors of MTDC (Margaret Kowalski, Chair) and (ii) review and approval by MTDC's General Counsel, Lydia Okafor. Accordingly, no comment or request contained herein shall be binding on MTDC or any Borrower Entity until and unless it has been reduced to a written agreement duly executed by all parties.

We look forward to your response and to a productive dialogue as we work together toward the finalization and closing of this important transaction.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Fairchild Partner

Direct Dial: (212) 455-7844 E-Mail: dfairchild@calderwoodharkness.com

cc: (via email)

David Harrington, Executive Director, Metropolitan Transit Development Corp. Priya Subramanian, Chief Financial Officer, Metropolitan Transit Development Corp. Marcus Jennings, Vice President, Real Estate Development, Metropolitan Transit Development Corp. Lydia Okafor, General Counsel, Metropolitan Transit Development Corp. Connor McBride, Project Director, Hudson Yards West, Metropolitan Transit Development Corp. Angela Fontaine, Partner, Calderwood & Harkness LLP Grace Nakamura, Senior Associate, Calderwood & Harkness LLP Rafael Dominguez, Associate, Calderwood & Harkness LLP Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Rebecca Thornton, In-house Counsel, Granite Peak Capital Partners, LP Natasha Ivanovic, Partner, Voss Richter & Baines LLP

Encl: Marked-Up Mezzanine Loan Term Sheet dated March 7, 2025 (redline reflecting MTDC comments)

CALDERWOOD & HARKNESS LLP
Attorneys at Law
One Liberty Plaza, 55th Floor New York, New York 10006
Telephone: (212) 455-7800 Facsimile: (212) 455-7801
www.calderwoodharkness.com
Writer's Direct Dial: (212) 455-7844 Writer's E-Mail: dfairchild@calderwoodharkness.com
March 10, 2025
Via E-Mail and Sundial Data Systems
Diane Castellano, Esq. Managing Partner Granite Peak Capital Partners, LP 9 West 57th Street, Suite 4200 New York, New York 10019
Victor Salinas Senior Vice President, Originations Granite Peak Capital Partners, LP 9 West 57th Street, Suite 4200 New York, New York 10019
Re: Mezzanine Loan Term Sheet dated March 7, 2025 — Hudson Yards West Development, 450 West 34th Street, New York, New York 10001; Mezzanine Loan in the Amount of $200,000,000; Borrower: Hudson Yards West Mezzanine LLC; Sponsor: Metropolitan Transit Development Corp. C&H Matter No. 1031-00004
Dear Diane and Victor:
We write on behalf of our client, Metropolitan Transit Development Corp. ("MTDC" or the "Sponsor"), and the borrower entities organized or to be organized in connection with the above-referenced transaction (collectively, the "Borrower Entities"), for which this Firm serves as outside real estate finance counsel. This letter relates to the proposed $200,000,000 mezzanine loan (the "Mezzanine Loan") to be made by Granite Peak Capital Partners, LP ("Granite Peak" or the "Mezzanine Lender") to Hudson Yards West Mezzanine LLC ("HYW Mezzanine" or the "Borrower") in connection with the development of the mixed-use project known as Hudson Yards West, located at 450 West 34th Street, New York, New York 10001 (the "Project").
We refer to the Mezzanine Loan Term Sheet dated March 7, 2025 (the "Term Sheet"), which has been executed by the parties. The purpose of this letter is to transmit MTDC's comments on and requested revisions to the Term Sheet, organized thematically. We have endeavored to be as specific as possible in our requests so that the parties may efficiently resolve open points and move toward the preparation and negotiation of definitive loan documentation.
As you are aware, parallel discussions are currently underway with Ironclad National Bank, N.A. ("Ironclad"), in its capacity as administrative agent for the syndicate of senior mortgage lenders, regarding the $475,000,000 senior mortgage loan (the "Senior Loan") and the related Intercreditor Agreement (the "ICA") to be entered into among Ironclad, Granite Peak, and the applicable Borrower Entities. We anticipate that a number of the points raised in this letter will require trilateral discussion involving Ironclad and its counsel.
We wish to express MTDC's appreciation for Granite Peak's collaborative approach throughout the term-sheet negotiation process. The parties have made meaningful progress, and MTDC is committed to resolving the remaining open points in an expeditious manner. Our shared objective remains a closing date of June 15, 2025, and the comments below are offered in furtherance of that timeline.
Our comments are set forth below.
I. YIELD MAINTENANCE AND PREPAYMENT PROVISIONS
A. Yield Maintenance Period — Request for Shortened Lockout
Section 6(a) of the Term Sheet, as executed, provides for a twenty-four (24) month hard lockout period on voluntary prepayment of the Mezzanine Loan, commencing on the closing date (the "Lockout Period"), followed by a yield-maintenance premium (the "Yield Maintenance Premium") applicable to any voluntary prepayment made after the expiration of the Lockout Period through the initial maturity date of September 15, 2029, calculated on the basis of the 11.50% per annum fixed coupon rate (the "Coupon Rate").
MTDC respectfully requests the following modifications to the prepayment framework:
(i) Reduction of Hard Lockout Period. The hard lockout on voluntary prepayment should be reduced from twenty-four (24) months to eighteen (18) months from the closing date. MTDC believes that eighteen months provides Granite Peak with a meaningful period of yield certainty while preserving the Sponsor's ability to respond to favorable market conditions or strategic refinancing opportunities that may arise earlier in the Project's development timeline.
(ii) Open Prepayment Window. The Yield Maintenance Premium should be eliminated during the final six (6) months preceding the initial maturity date — that is, the period from March 15, 2029 through June 15, 2029 — creating an open prepayment window (the "Open Window") during which the Borrower may repay the Mezzanine Loan in whole without payment of any premium or penalty, other than accrued and unpaid interest through the date of prepayment and any applicable exit fee (as discussed in Section IV.C below). For the avoidance of doubt, the Mezzanine Loan would continue to mature on September 15, 2029, and the Open Window would not affect the stated maturity date.
The commercial rationale for these requests is straightforward. The Project's construction schedule, as reflected in the construction budget and timeline approved by both Granite Peak and Ironclad, projects substantial completion of the core and shell by December 15, 2027, with the first Temporary Certificate of Occupancy ("TCO") anticipated by March 15, 2028. Following substantial completion and initial occupancy, MTDC intends to pursue permanent take-out financing or a capital-markets execution — potentially including a CMBS securitization, a private-placement note offering, or an institutional permanent loan — to retire both the Senior Loan and the Mezzanine Loan. The ability to retire the Mezzanine Loan during the Open Window without incurring a punitive yield-maintenance cost is essential to MTDC's capitalization strategy and will facilitate an orderly and timely exit from the construction-period financing.
We note that an eighteen-month lockout with a six-month open window prior to maturity is consistent with market practice for construction mezzanine facilities of comparable size and is, in fact, more protective of the mezzanine lender's yield than the structures seen in several recent comparable transactions in the New York City market.
B. Yield Maintenance Calculation Methodology
Section 6(b) of the Term Sheet references a "make-whole" calculation for the Yield Maintenance Premium based on the prevailing Treasury rate but does not specify the particular U.S. Treasury benchmark to be used or the discounting convention to be applied. MTDC believes it is important to address these definitional issues at the term-sheet stage to avoid protracted negotiation during the documentation phase.
MTDC requests that the definitive loan documents incorporate the following methodology for calculating the Yield Maintenance Premium:
(i) discount Rate. The discount rate used to calculate the present value of the remaining scheduled interest payments shall be the yield (as reported on Westmark Services Inc. or, if unavailable, the Federal Reserve Statistical Release H.15) on the U.S. Treasury security whose maturity date is closest to the initial maturity date of the Mezzanine Loan (September 15, 2029), as of the second business day preceding the date of prepayment. In the event that two U.S. Treasury securities have maturity dates equally close to the initial maturity date, the security with the lower yield shall be used.
(ii) discounting Convention. The make-whole amount shall be calculated on a present-value basis using semiannual discounting and a 30/360 day-count convention, which is consistent with the quotation conventions for U.S. Treasury securities and eliminates potential ambiguity arising from alternative day-count methods.
(iii) Elimination of Premium Floor. Section 6(b) of the Term Sheet references a minimum prepayment premium or "floor" of 1.0% of the then-outstanding principal balance of the Mezzanine Loan. MTDC requests that this floor be deleted in its entirety. The yield-maintenance formula itself is specifically designed to compensate the Mezzanine Lender for the economic loss arising from early repayment by discounting the remaining interest stream at the applicable Treasury rate. A minimum premium floor layered on top of the make-whole calculation results in an overcompensation to the Mezzanine Lender and is, in MTDC's view, inappropriate for a construction mezzanine facility where the underlying asset is in a development stage and the risk profile decreases materially as the Project approaches stabilization. We note that yield-maintenance floors are more commonly associated with stabilized, permanent mezzanine debt, and we do not believe such a floor is warranted here.
C. Partial Prepayment
The Term Sheet, as executed, is silent on the subject of partial voluntary prepayment of the Mezzanine Loan. MTDC requests that the definitive loan documents include an express right of partial prepayment, subject to the following parameters:
(i) Minimum Increment. Each partial prepayment shall be in a minimum amount of $10,000,000 (or, if less, the entire remaining outstanding principal balance of the Mezzanine Loan).
(ii) Timing. Partial prepayments shall be permitted only after the expiration of the Lockout Period (as reduced to eighteen (18) months per Section I.A above).
(iii) No Yield Maintenance Premium. Partial prepayments made in compliance with the conditions set forth in this paragraph shall not be subject to the Yield Maintenance Premium.
(iv) Conditions to Partial Prepayment. The right to make partial prepayments without Yield Maintenance Premium shall be conditioned upon the Borrower's demonstration, through an officer's certificate delivered to Granite Peak not less than ten (10) business days prior to the proposed prepayment date, that, on a pro forma basis after giving effect to such partial prepayment: (a) the combined loan-to-value ratio (the "Combined LTV"), calculated using an appraisal obtained within twelve (12) months prior to the date of such prepayment (or, if more recently available, the most recent appraisal obtained in connection with a Senior Loan draw request), does not exceed 65.85%; and (b) the combined debt service coverage ratio (the "Combined DSCR"), calculated on the basis of in-place net operating income for the trailing twelve-month period (or, if the Project has not yet achieved twelve months of operating history, on the basis of annualized net operating income for the most recent calendar quarter), is not less than 1.20x.
(v) Application of Partial Prepayments. Partial prepayments shall be applied in inverse order of maturity (i.e., to the last scheduled installments of principal first), unless otherwise agreed by the parties.
The right of partial prepayment is an important element of MTDC's capital management strategy and provides meaningful flexibility to reduce the Mezzanine Loan balance as the Project generates cash flow and the Sponsor obtains access to additional permanent capital sources.
D. Mandatory Prepayment from Excess Cash Flow
MTDC acknowledges the Term Sheet's provision, set forth in Section 6(d), requiring a mandatory prepayment sweep of fifty percent (50%) of Excess Cash Flow (as defined in the Term Sheet) following Project stabilization (the "Cash Sweep"). MTDC has the following comments and requests regarding the Cash Sweep mechanics:
(i) Reduction of Sweep Percentage. MTDC requests that the Cash Sweep percentage be reduced from fifty percent (50%) to twenty-five percent (25%) of Excess Cash Flow. A twenty-five percent sweep provides Granite Peak with meaningful deleveraging while preserving adequate cash flow for the Sponsor to fund tenant improvement obligations, leasing commissions, capital expenditures, and other Project-level costs that are essential to maintaining and increasing the value of the collateral securing both the Senior Loan and the Mezzanine Loan. We note that a fifty percent sweep is aggressive relative to market norms for construction mezzanine facilities and could, paradoxically, impair the Project's ability to achieve and sustain stabilization by diverting funds that would otherwise be available for leasing and operational purposes.
(ii) Commencement Trigger. The Cash Sweep should not commence until the Project has achieved eighty-five percent (85%) economic occupancy (i.e., tenants in occupancy and paying rent, including tenants in a free-rent period to the extent such free-rent period is consistent with the approved leasing guidelines) for two (2) consecutive calendar quarters. This threshold is consistent with the leasing threshold deadline of September 15, 2029 set forth in the Term Sheet and ensures that the Cash Sweep does not commence prematurely — that is, before the Project has demonstrated a sustainable income stream sufficient to support ongoing operations, debt service, and the required capital reserves.
(iii) No Yield Maintenance Premium on Sweep Prepayments. Mandatory prepayments resulting from the Cash Sweep should be applied without any Yield Maintenance Premium, exit fee, or other penalty. Because the Cash Sweep is a mandatory (not voluntary) prepayment obligation, imposing a yield-maintenance cost on such payments would effectively penalize the Borrower for the Project's success, which is a result that neither party intends.
II. MEZZANINE LENDER CURE RIGHTS
A. Scope of Cure Rights
MTDC supports Granite Peak's right to cure defaults under the Senior Loan in the context of the Intercreditor Agreement, and MTDC recognizes that robust cure rights are an integral component of the mezzanine lender's credit protection. However, MTDC requests that the cure-rights provisions be reciprocal in nature and appropriately bounded, so as to provide Granite Peak with a meaningful opportunity to protect its position without creating uncapped or open-ended obligations that could have unintended consequences for the capital structure. The specific parameters that MTDC requests are as follows:
1. Monetary Default Cure Period.  Granite Peak should have a cure period of ten (10) business days following receipt of written notice from Ironclad (in its capacity as administrative agent for the senior mortgage lenders) to cure any monetary default under the Senior Loan documents. This ten (10) business day cure period is designed to be consistent with, and supplementary to, the five (5) business day cure period afforded to HYW Mortgage LLC ("HYW Mortgage"), the senior mortgage borrower, under the Senior Loan Agreement. The additional five (5) business days provide Granite Peak with a reasonable additional window in which to (a) receive and process the default notice from Ironclad, (b) evaluate the nature and amount of the monetary default, (c) coordinate with MTDC and the Borrower regarding the source and timing of funds, and (d) effectuate the cure payment. MTDC notes that the ten-business-day mezzanine cure period for monetary defaults is a well-established market standard in New York City construction finance intercreditor agreements and should not be controversial.
2. Non-Monetary Default Cure Period.  Granite Peak should have a cure period of thirty (30) days following receipt of written notice from Ironclad to cure (or to commence cure of) any non-monetary default under the Senior Loan documents. Non-monetary defaults may encompass a wide range of circumstances — including breaches of operating covenants, zoning compliance issues, environmental matters, insurance lapses, and failures to deliver required reports or certifications — many of which require investigation, analysis, and coordination among multiple parties before a cure can be implemented. Accordingly, MTDC requests that the thirty (30) day cure period be subject to a reasonable extension of an additional sixty (60) days (for an aggregate non-monetary cure period of up to ninety (90) days) if the non-monetary default is of a nature that cannot reasonably be cured within the initial thirty (30) day period and Granite Peak is diligently pursuing such cure. The determination of whether Granite Peak is "diligently pursuing" cure should be based on an objective standard and should take into account the nature of the default, the actions required to effectuate cure, and any third-party approvals or governmental actions that may be necessary.
3. Limitation on Cure Obligation.  MTDC requests that the Intercreditor Agreement include a monetary cap on any single cure payment or advance by Granite Peak. Specifically, no single cure by Granite Peak should obligate Granite Peak to advance more than $20,000,000 without Granite Peak's express prior written consent. This cap is intended to prevent the intercreditor mechanics from operating as a de facto unconsented capital call on the Mezzanine Lender, which could have adverse consequences for Granite Peak's own fund-level liquidity and portfolio management. MTDC believes that a $20,000,000 cap per cure event provides ample room for Granite Peak to address the vast majority of potential monetary defaults while ensuring that any cure obligation of extraordinary magnitude is subject to a deliberate decision by Granite Peak's investment committee. The parties may wish to discuss whether the cap should be measured on a per-cure-event basis, a rolling twelve-month aggregate basis, or both, and MTDC is prepared to engage constructively on the appropriate structure.
4. No Waiver of Mezzanine Borrower Obligations.  For the avoidance of doubt, MTDC requests that the Intercreditor Agreement and the Mezzanine Loan documents expressly provide that any exercise or non-exercise of cure rights by Granite Peak does not release, waive, or otherwise affect the obligations of HYW Mezzanine or MTDC under the Mezzanine Loan documents. The cure-rights provisions are intended to protect the Mezzanine Lender's position in the capital structure and to preserve the Project as a going concern; they are not intended to shift the underlying repayment obligation or any other Borrower or Sponsor covenant to the Mezzanine Lender. Any amounts advanced by Granite Peak in connection with a cure should be added to the outstanding principal balance of the Mezzanine Loan (or, at Granite Peak's election, treated as a protective advance bearing interest at the default rate under the Mezzanine Loan), and the Borrower and Sponsor should remain fully liable for all such amounts.
B. Purchase Option
Section 8(c) of the Term Sheet grants Granite Peak an option to purchase the Senior Loan at par (plus accrued and unpaid interest, fees, and expenses) upon the occurrence and during the continuance of an Event of Default under the Senior Loan (the "Purchase Option"). MTDC acknowledges the importance of the Purchase Option to Granite Peak's investment thesis and supports the inclusion of this right in the Intercreditor Agreement. However, MTDC requests the following modifications and clarifications to the Purchase Option:
(i) Expanded Trigger Events. The Purchase Option should be triggered not only by the occurrence and continuance of an Event of Default under the Senior Loan (as currently provided), but also by (a) any acceleration of the Senior Loan by Ironclad, and (b) the commencement of any enforcement action by Ironclad against HYW Mortgage's assets, including without limitation any UCC foreclosure on the Senior Loan collateral, any exercise of power of sale under the mortgage, or any application for the appointment of a receiver. These expanded trigger events are essential because, in practice, the occurrence of an Event of Default alone may not provide Granite Peak with sufficient notice or urgency to exercise the Purchase Option before Ironclad takes actions that could destroy the value of Granite Peak's mezzanine position.
(ii) Minimum Exercise Window. The Purchase Option exercise period should be not less than sixty (60) days from the date of the applicable trigger event. The sixty-day window is necessary to allow Granite Peak adequate time to (a) evaluate the status of the Senior Loan and the Project, (b) conduct any additional due diligence that may be required, (c) arrange financing for the purchase of the Senior Loan (which, at a principal amount of up to $475,000,000, represents a significant capital commitment), and (d) negotiate and execute the assignment and assumption documentation with Ironclad. A shorter exercise window would, as a practical matter, render the Purchase Option illusory, particularly in a distressed scenario where information flow may be impaired and transaction execution may be more complex.
We note that the Purchase Option is a critical intercreditor point that will need to be negotiated trilaterally with Ironclad and its counsel at Clearfield & Associates LLP (Harrison Whitmore). MTDC expects that Ironclad will have views on the scope and mechanics of the Purchase Option, and we believe it is advisable to address these issues early in the intercreditor negotiation process to avoid delays in the overall transaction timeline.
C. Subordination Mechanics
MTDC acknowledges and expects that the Intercreditor Agreement will provide for subordination of the Mezzanine Loan to the Senior Loan on both a payment basis and a lien basis, consistent with the structural subordination inherent in the mezzanine position. However, MTDC requests that the subordination provisions include a "standstill" concept (the "Standstill Period") designed to provide an orderly framework for the resolution of defaults and enforcement actions. Specifically, MTDC requests the following:
(i) Upon the occurrence of an Event of Default under the Senior Loan that gives rise to a right on the part of Ironclad to exercise remedies against HYW Mezzanine's pledged equity interests in HYW Mortgage (or against any other collateral securing the Mezzanine Loan), Ironclad shall provide written notice to Granite Peak of its intent to exercise such remedies.
(ii) For a period of one hundred eighty (180) days following delivery of such notice (the "Standstill Period"), Ironclad shall not exercise any remedies against HYW Mezzanine's pledged equity interests or against any other collateral securing the Mezzanine Loan, provided that nothing in the Standstill Period shall restrict Ironclad's right to exercise remedies directly against HYW Mortgage or the Project-level collateral securing the Senior Loan.
(iii) During the Standstill Period, Granite Peak may exercise its cure rights under the Intercreditor Agreement, negotiate a workout or restructuring with Ironclad, exercise the Purchase Option, or take such other actions as Granite Peak deems appropriate to protect and preserve the value of the mezzanine position.
(iv) Upon expiration of the Standstill Period, if the applicable Event of Default has not been cured and the Purchase Option has not been exercised, Ironclad shall be free to exercise all remedies available to it under the Intercreditor Agreement and applicable law.
MTDC views the Standstill Period as essential to preserving the value of the mezzanine position and, equally importantly, to preserving the value of the Project as a going concern. The one hundred eighty (180) day duration of the Standstill Period is necessary to provide Granite Peak with a realistic opportunity to evaluate alternatives and marshal resources. A rushed enforcement process that does not afford the Mezzanine Lender adequate time to act would likely result in value destruction for all parties — including the senior lenders — and is inconsistent with the orderly resolution of distressed construction-stage assets.
III. INTERCREDITOR AGREEMENT — ADDITIONAL NEGOTIATION POINTS
In addition to the cure-rights, purchase-option, and subordination provisions discussed in Section II above, MTDC has the following comments and requests with respect to the Intercreditor Agreement.
A. Consent Rights over Senior Loan Modifications
MTDC requests that the Intercreditor Agreement include a provision requiring Ironclad to obtain Granite Peak's prior written consent (such consent not to be unreasonably withheld, conditioned, or delayed) before agreeing to any modification, amendment, waiver, or supplement of the Senior Loan documents that would have a material adverse effect on the Mezzanine Lender's position. Without limiting the generality of the foregoing, Granite Peak's prior written consent should be required for any modification that would:
(i) increase the principal amount of the Senior Loan above $475,000,000, whether through an increase in commitments, the addition of protective advances, or otherwise (other than protective advances by Ironclad not exceeding $5,000,000 in the aggregate);
(ii) increase the interest rate, default rate, or fees payable under the Senior Loan documents;
(iii) shorten the stated maturity date of the Senior Loan or accelerate any scheduled amortization payments;
(iv) modify the cash management, lockbox, or waterfall provisions in a manner that would reduce or delay distributions to the Mezzanine Lender or the Borrower Entities; or
(v) release, subordinate, or impair any collateral securing the Senior Loan (including the mortgage lien on the Project), other than releases of immaterial personal property in the ordinary course of business.
These consent rights are fundamental to the Mezzanine Lender's ability to monitor and protect its investment. Modifications to the Senior Loan that increase the senior debt burden, alter the economic terms, or impair the collateral pool have a direct and potentially significant impact on the recovery available to the Mezzanine Lender in a distressed scenario, and Granite Peak should have the opportunity to evaluate and consent to any such changes before they become effective.
B. Casualty and Condemnation Proceeds
Section 9 of the Term Sheet provides that insurance proceeds and condemnation awards relating to the Project shall be applied entirely to the Senior Loan. MTDC objects to this provision and requests the following alternative framework:
(i) Restoration Priority. Insurance proceeds and condemnation awards shall be applied first to the restoration of the Project, subject to customary feasibility conditions, including (a) the availability of sufficient proceeds (together with any additional funds committed by the Sponsor) to complete restoration, (b) the ability to complete restoration within a commercially reasonable timeframe, and (c) the absence of any uncured Event of Default under the Senior Loan or the Mezzanine Loan that has resulted in an acceleration of either loan.
(ii) Distribution of Excess Proceeds. In the event that insurance proceeds or condemnation awards remain after the completion of restoration (or if restoration is not feasible under the standards described above), such excess proceeds shall be applied to repayment of the Senior Loan and the Mezzanine Loan on a pro rata basis based on the respective outstanding principal balances of the Senior Loan and the Mezzanine Loan as of the date of distribution, rather than entirely to the Senior Loan as stated in the Term Sheet.
The pro rata sharing of excess casualty and condemnation proceeds is a matter of fundamental fairness to the Mezzanine Lender. Where a casualty or condemnation event renders the Project incapable of restoration (or where proceeds exceed restoration costs), the resulting diminution in value affects the Mezzanine Lender's collateral position at least as significantly as it affects the senior lender's position, and a pro rata sharing of proceeds is the most equitable outcome. We acknowledge that this point may require negotiation with Ironclad and its counsel, and we are prepared to discuss alternative structures, including a "first dollar" allocation to the Senior Loan up to a specified threshold, if that would facilitate agreement.
C. Reserve Accounts and Cash Management
Section 10 of the Term Sheet contemplates that Ironclad, as the senior lender, will control all reserve accounts (including the interest reserve, tax and insurance escrow, replacement reserve, tenant improvement and leasing commission reserve, and completion guaranty reserve) and the lockbox account through which all Project revenues and disbursements will flow. MTDC does not object to Ironclad's control over reserve accounts and the lockbox during the construction period, when Ironclad is actively overseeing construction draws, budget compliance, and milestone verification.
However, MTDC requests the following provisions applicable after the conversion of the Senior Loan from the construction phase to the permanent phase, which is projected to occur following the issuance of the first TCO (anticipated March 15, 2028):
(i) Monthly Reporting. Following the conversion to the permanent phase, Ironclad shall provide Granite Peak with monthly reports on all reserve and cash management accounts, including (a) beginning and ending balances for each account, (b) all deposits into and disbursements from each account during the reporting period, (c) a reconciliation of actual disbursements against budgeted amounts, and (d) a summary of any pending draw requests or anticipated disbursements. Such reports shall be delivered within fifteen (15) business days following the end of each calendar month.
(ii) Notice of Large Disbursements. Any release of funds from reserve accounts in excess of $2,000,000 in any single disbursement (or series of related disbursements) during the permanent phase shall require Ironclad to provide not less than five (5) business days' prior written notice to Granite Peak, setting forth the amount, purpose, and payee of such disbursement. For the avoidance of doubt, this notice requirement is informational only and does not constitute a consent right on the part of Granite Peak; Ironclad shall retain sole discretion over reserve disbursements in accordance with the terms of the Senior Loan documents.
These reporting and notice provisions will enable Granite Peak to maintain appropriate oversight of the Project's financial operations during the permanent phase without interfering with Ironclad's administrative control over the reserve and cash management architecture.
D. Bankruptcy-Related Provisions
MTDC requests that the Intercreditor Agreement include standard provisions addressing the rights of the Mezzanine Lender in the context of a bankruptcy proceeding or UCC disposition, as follows:
(i) Credit Bidding. Granite Peak shall have the right to credit bid up to the full amount of the outstanding Mezzanine Loan (including accrued and unpaid interest, fees, and expenses) in any bankruptcy sale (whether under Section 363 of the Bankruptcy Code or pursuant to a plan of reorganization) or UCC disposition of the collateral securing the Senior Loan or the Mezzanine Loan.
(ii) Proof of Claim. Granite Peak shall have the right to file a proof of claim in any bankruptcy proceeding involving HYW Mortgage, HYW Mezzanine, or any other Borrower Entity, and Ironclad shall not object to or seek to disallow any such proof of claim on the grounds of subordination or any other theory.
(iii) Standing as Party in Interest. Ironclad shall waive the right to object to Granite Peak's standing as a party in interest in any bankruptcy proceeding involving HYW Mortgage, HYW Mezzanine, or any other Borrower Entity, and shall not seek to limit Granite Peak's participation in such proceeding on the grounds of subordination or any other theory, provided that Granite Peak's rights in such proceeding remain subject to the payment and lien subordination provisions of the Intercreditor Agreement.
These bankruptcy-related provisions are standard in intercreditor agreements for mezzanine construction facilities in the New York market and are essential to preserving Granite Peak's ability to protect its investment in a distressed scenario. MTDC expects that Ironclad's counsel will be familiar with these provisions and that they should not be a significant point of contention in the intercreditor negotiation.
IV. ADDITIONAL TERM-SHEET COMMENTS
A. Mezzanine Loan Interest Rate
MTDC confirms its acceptance of the fixed interest rate of 11.50% per annum, as set forth in Section 3 of the Term Sheet. No further comment is required on this point.
B. Origination Fee
MTDC confirms its acceptance of the origination fee of 1.50% of the Mezzanine Loan commitment amount, equal to $3,000,000, payable to Granite Peak at closing out of Mezzanine Loan proceeds. No further comment is required on this point.
C. Exit Fee
Section 5 of the Term Sheet provides for an exit fee of 0.50% of the outstanding principal balance of the Mezzanine Loan at the time of repayment or maturity (the "Exit Fee"). MTDC requests that the Exit Fee be waived — that is, reduced to zero — in the event that the Mezzanine Loan is repaid in full on or prior to the initial maturity date of September 15, 2029. The Exit Fee should apply only to repayments that occur during any extension period following the initial maturity date.
The rationale for this request is that the Exit Fee, when combined with the Yield Maintenance Premium (or, during the Open Window, the absence thereof), results in an excessive aggregate cost of prepayment that is not commensurate with the risk profile of a construction mezzanine facility. MTDC believes that if the Borrower repays the Mezzanine Loan in full by the initial maturity date — thereby eliminating any extension risk for the Mezzanine Lender — the origination fee, the Coupon Rate, and (to the extent applicable) the Yield Maintenance Premium provide Granite Peak with a fully adequate return on its investment, and the imposition of an additional Exit Fee is not warranted. The Exit Fee should be reserved for situations in which the Borrower exercises an extension option and thereby requires Granite Peak to maintain its capital commitment beyond the initial maturity date.
D. Extension Options
Section 11 of the Term Sheet references two (2) one-year extension options (each, an "Extension Option"), permitting the Borrower to extend the maturity date of the Mezzanine Loan from September 15, 2029 to September 15, 2030 (first extension) and from September 15, 2030 to September 15, 2031 (second extension), subject to certain conditions. MTDC requests the following with respect to the Extension Options:
The conditions to the exercise of each Extension Option should be limited to the following:
(i) no Event of Default shall have occurred and be continuing under the Mezzanine Loan documents or, to the Borrower's knowledge, under the Senior Loan documents;
(ii) the Borrower shall have paid to Granite Peak an extension fee equal to 0.25% of the then-outstanding principal balance of the Mezzanine Loan, payable on the effective date of each extension;
(iii) the Combined DSCR, calculated on the basis of in-place net operating income for the trailing twelve-month period, shall be not less than 1.20x; and
(iv) the combined debt yield (calculated as in-place net operating income divided by the combined outstanding principal balances of the Senior Loan and the Mezzanine Loan) shall be not less than 8.0%.
MTDC requests the deletion of the additional extension condition set forth in Section 11(e) of the Term Sheet, which requires the Project to have achieved eighty-five percent (85%) economic occupancy as a prerequisite to the exercise of each Extension Option. This occupancy threshold is duplicative and unnecessary for the following reasons: (a) the leasing threshold deadline of September 15, 2029, which is the initial maturity date of the Mezzanine Loan, already provides a mechanism for evaluating the Project's leasing performance at the time the Borrower would first be seeking an extension; (b) the Combined DSCR and debt yield conditions described above are financial performance metrics that inherently reflect the Project's occupancy level, as projects that fail to achieve adequate occupancy will not meet the required DSCR and debt yield thresholds; and (c) the Cash Sweep trigger (DSCR below 1.10x) provides an additional mechanism for deleveraging the Mezzanine Loan in the event of underperformance, reducing the extension-period risk to the Mezzanine Lender. Imposing a separate occupancy test on top of these financial performance conditions creates the risk of a "false negative" — a scenario in which the Project is generating robust cash flow and meeting all financial covenants but is technically ineligible for extension due to a transient dip in occupancy arising from, for example, a large lease expiration that is in the process of being re-tenanted.
E. Representations and Warranties — SPE Status
MTDC intends to cause Hudson Yards West Mezzanine LLC to be formed as a single-purpose Delaware limited liability company with customary separateness covenants, including restrictions on (a) engaging in any business other than owning its equity interest in HYW Mortgage and activities incidental thereto, (b) incurring any indebtedness other than the Mezzanine Loan and trade payables in the ordinary course, (c) acquiring any assets other than its equity interest in HYW Mortgage, (d) merging, consolidating, or dissolving, (e) commingling funds or assets with any affiliate, and (f) holding itself out as other than a separate and distinct entity.
MTDC confirms its willingness to include an independent director (or independent manager, as applicable under Delaware law) requirement in the organizational documents of HYW Mezzanine. In addition, this Firm is prepared to deliver a reasoned, non-consolidation opinion at closing, opining that, subject to customary assumptions, qualifications, and limitations, in the event of a bankruptcy filing by MTDC or any affiliate, a court would not substantively consolidate the assets and liabilities of HYW Mezzanine with those of the filing entity.
MTDC acknowledges that Granite Peak may require a limited recourse guaranty from MTDC (a "Bad Boy Guaranty") covering SPE violations and certain other non-recourse carve-out events. MTDC is prepared to negotiate the specific carve-out triggers and the scope of the Sponsor's recourse liability in the context of the definitive loan documents. MTDC expects that the carve-out triggers will be limited to actions within the Sponsor's control (such as voluntary bankruptcy filings, fraud, misapplication of funds, and intentional waste) and will not include events that are beyond the Sponsor's reasonable control or that are more appropriately addressed through loan-level defaults and remedies.
F. Reporting Requirements
MTDC accepts the following reporting requirements as set forth in the Term Sheet:
(i) Quarterly Financial Reporting. Unaudited quarterly financial statements (including balance sheet, income statement, and cash flow statement) for HYW Mezzanine and the Project, delivered to Granite Peak within forty-five (45) days after the end of each fiscal quarter.
(ii) Annual Audited Financial Statements. Audited annual financial statements for HYW Mezzanine and the Project, prepared in accordance with GAAP and audited by Whitfield Albrecht & Co. LLP (or such other nationally recognized accounting firm as may be reasonably acceptable to Granite Peak), delivered to Granite Peak within one hundred twenty (120) days after the end of each fiscal year.
With respect to monthly construction draw reports, MTDC requests that the obligation to prepare and distribute such reports be allocated to Ironclad, in its capacity as the party controlling construction disbursements under the Senior Loan. Ironclad will be overseeing all construction draws, reviewing draw requests, engaging the construction consultant, and verifying construction progress — and is therefore in the best position to prepare accurate and timely construction draw reports. MTDC requests that the Senior Loan documents or the Intercreditor Agreement include a requirement that Ironclad provide copies of all monthly construction draw reports to Granite Peak concurrently with their distribution to HYW Mortgage and the construction consultant.
V. PROCESS AND NEXT STEPS
In light of the foregoing, MTDC respectfully requests a meeting — either in person at a mutually convenient location or by video conference — during the week of March 17, 2025 to discuss the comments set forth in this letter. MTDC proposes that representatives of Ironclad and Clearfield & Associates LLP (Harrison Whitmore) be invited to participate in the portion of the discussion addressing intercreditor issues, including the cure rights, purchase option, standstill period, consent rights over senior loan modifications, casualty and condemnation proceeds, reserve account reporting, and bankruptcy-related provisions discussed in Sections II and III above. We believe that early engagement with the senior lender on these topics will significantly reduce the risk of delays in the intercreditor negotiation and contribute to maintaining the overall transaction timeline.
A revised, marked-up version of the Term Sheet reflecting the changes requested herein is enclosed with this letter for your reference. The redline has been prepared against the executed version of the Term Sheet dated March 7, 2025 and identifies each proposed modification with a brief explanatory annotation.
MTDC requests that Granite Peak and its counsel, Voss Richter & Baines LLP (Natasha Ivanovic), review the foregoing comments and the enclosed redline and circulate any counter-comments or responses by March 21, 2025. Adhering to this response timeline is important in order to maintain the target first-draft distribution date of May 1, 2025 for the definitive Mezzanine Loan documents, including the Mezzanine Loan Agreement, the Mezzanine Note, the Pledge and Security Agreement, the Mezzanine Environmental Indemnity Agreement, the Bad Boy Guaranty, and the Intercreditor Agreement. Timely distribution of first drafts by May 1, 2025 is, in turn, essential to achieving the parties' shared target closing date of June 15, 2025.
VI. RESERVATION OF RIGHTS
Nothing in this letter shall constitute, or shall be deemed to constitute, a waiver, modification, or amendment of the Term Sheet or any of the rights, remedies, or obligations of any party thereunder, except to the extent expressly agreed in writing by all parties to the Term Sheet. MTDC and the Borrower Entities expressly reserve all of their respective rights, remedies, and defenses under the Term Sheet, under applicable law, and in equity, and no failure or delay on the part of MTDC or any Borrower Entity to exercise any such right, remedy, or defense shall operate as a waiver thereof.
The comments and requests set forth in this letter are for discussion purposes only and are subject to (i) formal approval by the Board of Directors of MTDC (Margaret Kowalski, Chair) and (ii) review and approval by MTDC's General Counsel, Lydia Okafor. Accordingly, no comment or request contained herein shall be binding on MTDC or any Borrower Entity until and unless it has been reduced to a written agreement duly executed by all parties.
We look forward to your response and to a productive dialogue as we work together toward the finalization and closing of this important transaction.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Fairchild Partner
Direct Dial: (212) 455-7844 E-Mail: dfairchild@calderwoodharkness.com
cc: (via email)
David Harrington, Executive Director, Metropolitan Transit Development Corp. Priya Subramanian, Chief Financial Officer, Metropolitan Transit Development Corp. Marcus Jennings, Vice President, Real Estate Development, Metropolitan Transit Development Corp. Lydia Okafor, General Counsel, Metropolitan Transit Development Corp. Connor McBride, Project Director, Hudson Yards West, Metropolitan Transit Development Corp. Angela Fontaine, Partner, Calderwood & Harkness LLP Grace Nakamura, Senior Associate, Calderwood & Harkness LLP Rafael Dominguez, Associate, Calderwood & Harkness LLP Sylvia Hartwell, Partner (Tax), Calderwood & Harkness LLP Rebecca Thornton, In-house Counsel, Granite Peak Capital Partners, LP Natasha Ivanovic, Partner, Voss Richter & Baines LLP
Encl: Marked-Up Mezzanine Loan Term Sheet dated March 7, 2025 (redline reflecting MTDC comments)

CALDERWOOD & HARKNESS LLP

I. YIELD MAINTENANCE AND PREPAYMENT PROVISIONS

II. MEZZANINE LENDER CURE RIGHTS

IV. ADDITIONAL TERM-SHEET COMMENTS

V. PROCESS AND NEXT STEPS

VI. RESERVATION OF RIGHTS

CALDERWOOD & HARKNESS LLP

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