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) 455-7000 Facsimile: (212) 455-7001 www.calderwoodharkness.com

Douglas Fairchild Partner — Real Estate Direct: (212) 455-7148 dfairchild@calderwoodharkness.com

March 1, 2025

Via Email and First-Class Mail

Kenneth Pryor, Managing Director Real Estate Finance Ironclad National Bank, N.A. 277 Park Avenue, 38th Floor New York, New York 10172

Samantha Bledsoe, Vice President Loan Originations Ironclad National Bank, N.A. 277 Park Avenue, 38th Floor New York, New York 10172

Re: Metropolitan Transit Development Corp. — Senior Mortgage Loan ($475,000,000) — Hudson Yards West Project, 450 West 34th Street, New York, New York 10001 (the "Project") — Comments on Term Sheet dated February 28, 2025 — C&H Matter No. 1031-00004

Dear Mr. Pryor and Ms. Bledsoe:

We are counsel to Metropolitan Transit Development Corp., a Delaware corporation ("MTDC"), in connection with the proposed $475,000,000 senior mortgage construction loan (the "Senior Mortgage Loan") to be made by Ironclad National Bank, N.A. ("Ironclad" or the "Agent"), as administrative agent for the syndicate of lenders to be formed, to Hudson Yards West Mortgage LLC (the "Mortgage Borrower" or "HYW Mortgage LLC"), a Delaware limited liability company and indirect subsidiary of MTDC, for the purpose of financing the development of the Hudson Yards West mixed-use development located at 450 West 34th Street, New York, New York 10001 (the "Project"). We write with reference to the executed term sheet dated February 28, 2025 (the "Term Sheet") between MTDC and Ironclad setting forth the principal economic and structural terms of the Senior Mortgage Loan.

At the outset, we wish to acknowledge the productive discussions between the parties to date and to express MTDC's continued commitment to finalizing definitive loan documents on a timeline consistent with the target closing date of June 15, 2025. MTDC has reviewed the Term Sheet in detail with its in-house legal, finance, and development teams, and this letter transmits MTDC's principal comments on and requested revisions to four key areas of the Term Sheet: (I) Extension Conditions (Term Sheet § 5); (II) Recourse Carve-Out Exceptions (Term Sheet § 9); (III) Cash Management and Cash Sweep Triggers (Term Sheet § 11); and (IV) Reserve Requirements (Term Sheet § 12). MTDC expressly reserves the right to raise additional comments and to propose further revisions in connection with the negotiation of the definitive loan documents, including but not limited to the Loan Agreement, the Mortgage, the Environmental Indemnity Agreement, the Guaranty, and the Intercreditor Agreement.

Capitalized terms used but not otherwise defined in this letter carry the meanings ascribed to them in the Term Sheet. For your convenience, a redline of the Term Sheet reflecting the proposed revisions discussed herein is enclosed as an attachment to this letter.

Our comments are set forth below.

I. Extension Conditions (Term Sheet § 5)

The Term Sheet provides for a four (4)-year initial term commencing on the Closing Date and maturing on June 15, 2029 (the "Initial Maturity Date"), with two (2) successive one (1)-year extension options available at Borrower's election (the "First Extension Option" and the "Second Extension Option," respectively, and each, an "Extension Option"), subject to the satisfaction of certain conditions. If both Extension Options are exercised, the First Extension Maturity Date would be June 15, 2030, and the Final Extended Maturity Date would be June 15, 2031. MTDC does not take issue with the overall term structure or the availability of two extension periods, but respectfully requests the following modifications to the conditions precedent to the exercise of each Extension Option.

A. No Event of Default — Proposed Cure Right

Section 5(a) of the Term Sheet provides that the exercise of each Extension Option is conditioned upon there being no Event of Default existing at the time of the delivery of the Extension Notice or at the commencement of the applicable extension period. MTDC does not object to the fundamental principle underlying this condition, which is standard in facilities of this nature. However, as currently drafted, the provision could be read to bar the exercise of an Extension Option even where a technical or readily curable default exists and the applicable notice and cure periods have not yet expired, or where a default has been identified and is in the process of being remedied in good faith.

MTDC respectfully requests that Section 5(a) be revised to provide that the Extension Option may be exercised so long as no Event of Default exists that has not been cured within any applicable notice and cure period provided under the Loan Agreement, including any cure period that is then running at the time of the delivery of the Extension Notice. Specifically, MTDC proposes that:

(i) a monetary default that is curable within five (5) business days after notice thereof from Agent to Borrower shall not bar the exercise of an Extension Option, provided that such monetary default is cured in full prior to the commencement of the applicable extension period; and

(ii) a non-monetary default that is curable within thirty (30) days after notice thereof from Agent to Borrower (or such longer period as may be reasonably necessary to effectuate a cure, provided Borrower has commenced such cure within such thirty (30)-day period and is diligently pursuing the same) shall not bar the exercise of an Extension Option, provided that such non-monetary default is cured in full prior to the commencement of the applicable extension period.

This approach is consistent with prevailing market practice in New York construction loan financings and recognizes that mechanical or minor defaults should not deprive the Borrower of the benefit of an extension right that is otherwise a fundamental economic term of the credit facility. We note that similar cure-right protections were incorporated in several recent comparable transactions in the Hudson Yards corridor, and we believe this formulation appropriately balances the Agent's interest in ensuring a performing credit against the Borrower's legitimate expectation of certainty with respect to the availability of the Extension Options.

B. DSCR Test at Extension

Section 5(b) of the Term Sheet provides that, as a condition to the exercise of each Extension Option, the Borrower must demonstrate a trailing-twelve-month Debt Service Coverage Ratio ("DSCR") of not less than 1.20x on a combined basis (i.e., taking into account both the Senior Mortgage Loan and the mezzanine indebtedness held by Granite Peak Capital Partners, LP). MTDC understands and appreciates Ironclad's focus on debt service coverage as a measure of the Project's performance, but believes that the 1.20x threshold is more appropriately applied as an ongoing covenant during the stabilized operating period rather than as a condition to the exercise of the Extension Options.

The extension periods are designed to provide the Borrower with additional time to achieve stabilized occupancy and operations. Projected substantial completion of the Project is December 15, 2027, with the first Temporary Certificate of Occupancy ("TCO") projected for March 15, 2028. Accordingly, the First Extension Option (exercisable for the period from June 15, 2029 to June 15, 2030) coincides directly with the lease-up phase of the Project, during which occupancy levels and rental income are anticipated to be ramping toward — but may not yet have achieved — the stabilized levels reflected in the MTDC business plan and the underwriting assumptions utilized by Ironclad's credit committee. It would be commercially unreasonable to apply the full stabilized-period DSCR standard to a period during which the Project is, by design, still in its initial lease-up trajectory.

MTDC proposes the following alternatives:

Primary Proposal: Reduce the extension DSCR threshold from 1.20x to 1.15x on a combined basis for purposes of the Extension Option conditions. The 1.20x level would continue to apply as the ongoing DSCR covenant during the extension periods themselves, but the entry condition to exercise the Extension Option would be set at 1.15x to provide a reasonable cushion for the lease-up dynamics described above.

Alternative Proposal: In the event that the trailing-twelve-month combined DSCR at the applicable extension date falls between 1.10x and 1.15x, MTDC proposes that the Borrower be permitted to exercise the Extension Option upon delivery of an additional cash deposit or irrevocable standby letter of credit (the "DSCR Shortfall Deposit") into a lender-controlled reserve account in an amount calculated by Agent as sufficient to achieve a pro forma combined DSCR of not less than 1.15x for the ensuing twelve (12)-month period. The DSCR Shortfall Deposit would be released to Borrower upon achievement of a trailing-twelve-month combined DSCR of 1.15x or greater for two (2) consecutive calendar quarters during the applicable extension period.

Either of these formulations would provide Ironclad with meaningful downside protection while preserving the commercial utility of the Extension Options for a project in its lease-up phase. MTDC believes this approach is consistent with the underwriting assumptions reflected in the credit memorandum and with the parties' shared expectation that the Project will achieve stabilized occupancy within approximately twenty-four (24) to thirty (30) months following first TCO.

C. LTV Test at Extension

Section 5(c) of the Term Sheet requires that the combined Loan-to-Value Ratio ("LTV") not exceed 70.0% as of each extension date, calculated on a combined basis inclusive of the mezzanine financing. MTDC does not object to the 70.0% threshold, which it views as reasonable for a project of this scale and quality, but does take issue with the methodology for determining value at the time of extension.

As currently drafted, the Term Sheet is ambiguous as to whether the LTV test at extension will be measured against the original appraised value reflected in the appraisal to be prepared by Broadstreet Appraisal Group (File No. BAG-25-1092, dated April 1, 2025, reflecting a projected "as-stabilized" value of $1,025,000,000) or against an updated appraisal obtained closer to the extension date. MTDC strongly believes that the LTV test at extension should reflect the actual value of the Project at the time the Extension Option is exercised, which may be materially higher than the original appraised value given anticipated construction progress, lease executions, and market conditions.

Accordingly, MTDC requests that Section 5(c) be revised to provide that, for purposes of the LTV test at each extension date, the value of the Project shall be determined by reference to a then-current appraisal prepared by a nationally recognized appraiser selected by Ironclad (which may be Broadstreet Appraisal Group or another appraiser reasonably acceptable to Borrower), obtained at Borrower's expense, and dated not more than ninety (90) days prior to the applicable extension date. The appraisal shall be prepared in accordance with the Uniform Standards of Professional Appraisal Practice ("USPAP") and shall employ an "as-is" valuation methodology (or, if the Project has not yet achieved stabilized occupancy, an "as-stabilized" methodology with an appropriate discount to present value). This approach ensures that the LTV test accurately reflects the condition and value of the Project at the relevant time, rather than relying on a potentially stale appraisal that does not account for intervening construction completion, leasing activity, or changes in the New York commercial real estate market.

D. Interest Rate Protection

Section 5(d) of the Term Sheet requires, as a condition to each Extension Option, that Borrower deliver an interest rate cap agreement with a notional amount equal to the then-outstanding principal balance of the Senior Mortgage Loan for the duration of the applicable extension period. MTDC does not object to this condition, which is standard and commercially appropriate given the floating-rate structure of the Senior Mortgage Loan. However, MTDC has concerns regarding the provision as drafted, which states that the required strike rate for the interest rate cap shall be "determined by Agent in its sole discretion."

Sole-discretion strike rate determination introduces unacceptable uncertainty into the economics of the Extension Options and effectively permits Ironclad to impose an economic condition on extension that is not knowable at the time of closing. MTDC proposes that Section 5(d) be revised to provide that the required strike rate for the interest rate cap agreement shall be set at the greater of:

(i) the then-current Term SOFR rate (as determined two (2) business days prior to the commencement of the applicable extension period) plus two hundred (200) basis points; and

(ii) five and one-quarter percent (5.25%).

This formulation provides certainty to both parties regarding the minimum protection level required while also ensuring that the cap provides meaningful coverage above prevailing rates. MTDC further proposes that the interest rate cap provider be required to carry a long-term unsecured debt rating of at least A– from Pinnacle Ratings Group (or the equivalent rating from a nationally recognized statistical rating organization), which is consistent with the cap counterparty requirements in comparable recent transactions. The form of the interest rate cap confirmation shall be reasonably acceptable to both Borrower and Agent.

E. Extension Fee

Section 5(e) of the Term Sheet provides for an extension fee equal to twenty-five basis points (0.25%) of the then-outstanding principal balance of the Senior Mortgage Loan, payable upon the exercise of each Extension Option. MTDC proposes that the extension fee be reduced as follows:

(i) First Extension Option: Fifteen basis points (0.15%) of the then-outstanding principal balance; and

(ii) Second Extension Option: Twenty basis points (0.20%) of the then-outstanding principal balance.

Based on MTDC's review of recent comparable construction loan transactions in the New York metropolitan area for mixed-use developments in excess of $400,000,000, the prevailing market range for extension fees is between 0.10% and 0.25%, with a weighted average closer to 0.15% for first extensions and 0.20% for second extensions. The tiered structure proposed by MTDC reflects the increased credit risk and administrative cost associated with a second extension while appropriately recognizing the lower incremental risk of a first extension following the construction period. We would be happy to share additional market data with Ironclad's team on a confidential basis if that would be helpful.

F. Extension Notice Period

Section 5(f) of the Term Sheet requires that the Extension Notice be delivered not less than ninety (90) days prior to the then-current maturity date. MTDC proposes that this notice period be shortened to not less than sixty (60) days prior to the then-current maturity date.

A sixty (60)-day notice period is standard in construction loan facilities of this type and provides MTDC with the flexibility to evaluate market conditions, leasing performance, and refinancing alternatives before committing to an extension and incurring the associated extension fee and interest rate cap costs. A ninety (90)-day requirement, by contrast, requires the Borrower to make a binding commitment to extension at a point when the relevant data—including trailing DSCR performance, leasing velocity, and prevailing capital markets conditions—may not yet be available for the period most proximate to the extension date. MTDC acknowledges that Ironclad has legitimate administrative and regulatory reasons for requiring advance notice, and MTDC believes that sixty (60) days provides ample time for Ironclad to plan for the extension, coordinate with the lending syndicate, and satisfy any internal reporting or approval requirements.

II. Recourse Carve-Out Exceptions (Term Sheet § 9)

MTDC acknowledges and accepts the non-recourse structure of the Senior Mortgage Loan, with Borrower's liability limited to its interest in the Project and the other collateral pledged to secure the Senior Mortgage Loan, subject to certain standard exceptions (the "Recourse Carve-Outs" or "bad boy" carve-outs) set forth in Section 9 of the Term Sheet. MTDC further acknowledges that MTDC will execute a guaranty of payment and performance with respect to the Recourse Carve-Outs (the "Carve-Out Guaranty") at closing.

While the general framework of the Recourse Carve-Outs is consistent with market practice, several of the enumerated carve-outs as drafted in the Term Sheet are overbroad in scope and do not contain the qualifications and limitations that are customary in non-recourse construction loans of this size in the current market. MTDC's comments on each of the principal Recourse Carve-Outs are set forth below. It is important that these provisions be narrowed at the term sheet level so that they can be properly documented in the definitive agreements without protracted negotiation.

A. Voluntary Bankruptcy Filing — SPE Qualifier

Section 9(a)(i) of the Term Sheet provides that a voluntary bankruptcy filing by the Borrower under any chapter of Title 11 of the United States Code (or any state-law equivalent) shall constitute a full-recourse trigger, rendering the entire outstanding principal balance of the Senior Mortgage Loan, together with all accrued interest, fees, and other amounts, recourse to the Carve-Out Guarantor.

MTDC does not object to this carve-out, which is standard and appropriate. However, MTDC requests that the following clarifications be incorporated:

(i) The voluntary bankruptcy filing carve-out should apply solely to a voluntary filing by the Mortgage Borrower (HYW Mortgage LLC) itself, and not to a voluntary filing by MTDC, any MTDC affiliate, or any other entity in the organizational chain above the Mortgage Borrower. The non-recourse structure contemplates that the Mortgage Borrower is a single-purpose entity ("SPE") whose sole asset is the Project, and the bankruptcy carve-out is designed to ensure that the Borrower does not seek to defeat Ironclad's remedies by placing that SPE into bankruptcy. A filing by MTDC or another affiliated entity that does not directly affect the Mortgage Borrower or the Project should not trigger full recourse under the Senior Mortgage Loan.

(ii) The Term Sheet and the definitive documents should specifically reference and incorporate the independent director/manager provisions that will be included in the organizational documents of HYW Mortgage LLC as a structural protection against voluntary bankruptcy filings. As is customary, the operating agreement of HYW Mortgage LLC will provide that no voluntary bankruptcy filing may be authorized without the prior written consent of at least one (1) independent director/manager who has no economic interest in the Borrower or its affiliates. MTDC believes that the presence of this structural protection further supports the narrowing of the carve-out to filings by the Mortgage Borrower itself.

B. Fraud and Intentional Misrepresentation — Materiality / Knowledge Qualifier

Section 9(a)(ii) of the Term Sheet provides that any fraud or intentional misrepresentation by Borrower, Guarantor, or their respective agents in connection with the Senior Mortgage Loan shall constitute a full-recourse trigger. As drafted, this carve-out contains no materiality qualifier and no knowledge standard, meaning that any misstatement—regardless of magnitude, impact, or the knowledge or intent of the party making it—could theoretically give rise to full recourse on a $475,000,000 credit facility.

MTDC requests the following revisions:

(i) Materiality Qualifier. The carve-out should be revised to apply to "material fraud or intentional material misrepresentation" rather than to any fraud or misrepresentation without regard to magnitude. This is not intended to excuse genuine fraud, which MTDC agrees should carry the most serious consequences. Rather, the materiality qualifier is designed to prevent the carve-out from being triggered by immaterial or technical inaccuracies in the extensive representations and warranties that will be included in the Loan Agreement. In a transaction of this complexity, involving hundreds of representations spanning environmental, zoning, title, organizational, financial, and construction matters, it is virtually inevitable that minor inaccuracies will arise despite the exercise of good faith and reasonable diligence. Full recourse should be reserved for conduct that is genuinely fraudulent and that has a material adverse effect on the value of the Project, the collateral, or Ironclad's security interest therein.

(ii) Knowledge Qualifier. The carve-out should include a knowledge qualifier, providing that it applies to misrepresentations "known to Borrower or Guarantor" (or, if applicable, "known to the officers, directors, or principals of Borrower or Guarantor having direct responsibility for the administration of the Senior Mortgage Loan"). This qualifier would exclude from the ambit of the carve-out innocent or inadvertent misstatements in representations that are later determined to be inaccurate without the knowledge or intent of the Borrower or Guarantor. The knowledge qualifier is not intended to and would not protect against actual fraud, which by definition involves intentional conduct.

The combination of a materiality qualifier and a knowledge qualifier is widely accepted in the New York market for non-recourse construction loans of this type and reflects the fundamental principle that the Recourse Carve-Outs are intended to address egregious "bad acts" by the borrower, not to convert a non-recourse loan into a recourse obligation through the operation of minor, good-faith errors.

C. Misapplication / Misappropriation of Funds

Section 9(a)(iii) of the Term Sheet provides that any misapplication or misappropriation by Borrower of (i) insurance proceeds, (ii) condemnation awards, or (iii) rents, revenues, and security deposits shall constitute a full-recourse trigger. MTDC acknowledges that the protection of insurance proceeds and condemnation awards is of critical importance to the Agent, as these funds represent a substitute for the collateral and must be applied in accordance with the terms of the Loan Agreement. Similarly, MTDC understands the Agent's interest in ensuring that rents and revenues generated by the Project are applied to debt service and approved operating expenses.

However, as drafted, the carve-out contains no de minimis threshold, no notice or cure period, and no exception for ordinary-course operating expenditures, which creates a risk that routine operational decisions—including the application of funds to Project-related expenses that may not have received prior Agent approval due to timing or administrative delays—could be characterized as a "misapplication" triggering full recourse. MTDC respectfully requests the following modifications:

(i) De Minimis Basket for Rents and Revenues. MTDC proposes that a threshold of $500,000 be added with respect to the misapplication of rents and revenues (but not insurance proceeds or condemnation awards, for which MTDC does not seek a threshold), below which the carve-out would not be triggered. This de minimis basket is appropriate given the scale of the Project and the Senior Mortgage Loan and is designed to ensure that minor, good-faith accounting discrepancies or timing differences in the application of rental income do not give rise to disproportionate recourse consequences.

(ii) Notice and Cure Period. MTDC proposes that Borrower be afforded a fifteen (15)-day notice and cure period, commencing upon written notice from Agent to Borrower specifying the alleged misapplication, during which Borrower may restore the misapplied funds to the applicable account or otherwise cure the misapplication. If the misapplication is cured in full within such fifteen (15)-day period, the carve-out would not be triggered. This cure right is consistent with the general approach taken throughout the Term Sheet of affording Borrower a reasonable opportunity to cure defaults before the imposition of the most severe consequences.

(iii) Ordinary Course Operating Expenses. MTDC proposes that amounts applied to Project-related operating expenses in the ordinary course of business be excluded from the definition of "misapplication," even if such amounts were applied without prior Agent approval, provided that Borrower notifies Agent of such application within ten (10) business days following the date of such application and provides reasonable supporting documentation. This exclusion recognizes the practical reality that, in the operation of a large-scale mixed-use development, certain operating expenditures—including emergency repairs, utility payments, and other time-sensitive costs—must be made promptly and may not always be subject to prior Agent approval due to the exigencies of day-to-day property management.

D. Unauthorized Transfer or Encumbrance

Section 9(a)(iv) of the Term Sheet provides that any transfer of the Project or any direct or indirect interest in the Borrower, or any encumbrance of the Project or any such interest, without the prior written consent of Agent, shall constitute a full-recourse trigger. MTDC acknowledges that due-on-sale and due-on-encumbrance protections are essential components of the Agent's credit underwriting and that unauthorized transfers or encumbrances that could impair the value of the collateral or the creditworthiness of the borrowing entity should appropriately give rise to recourse consequences.

However, as drafted, the carve-out is not limited to material transfers or encumbrances and does not exclude Permitted Transfers (to be defined in the Loan Agreement), which could result in full recourse being triggered by minor, immaterial, or expressly contemplated transactions. MTDC requests the following modifications:

(i) The transfer and encumbrance carve-out should be triggered only by a "material" unauthorized transfer or encumbrance. For this purpose, MTDC proposes that a "material" transfer or encumbrance be defined as one involving consideration or indebtedness in excess of $1,000,000, or any direct or indirect transfer of a controlling interest in HYW Mortgage LLC (defined as a transfer that results in a change in the identity of the Person exercising day-to-day management and operational control over the Mortgage Borrower or the Project).

(ii) Permitted Transfers, as such term will be defined in the Loan Agreement, should be expressly excluded from the scope of the carve-out. MTDC anticipates that the definition of Permitted Transfers will address, among other things, intra-family transfers, transfers to and among MTDC affiliates, estate planning transfers, and admissions of additional equity participants, in each case subject to customary conditions and Agent notification requirements.

E. Environmental Liability

Section 9(a)(v) of the Term Sheet provides that Borrower and Guarantor shall be liable on a recourse basis for any losses, costs, damages, or liabilities arising out of or relating to the presence, release, or threatened release of Hazardous Materials at, on, under, or from the Project, or any violation of Environmental Laws applicable to the Project. MTDC acknowledges that an environmental indemnity is a standard and appropriate component of a non-recourse construction loan and does not seek to eliminate this carve-out. However, as drafted, the carve-out is not limited to environmental conditions caused by or attributable to Borrower or Guarantor and could impose recourse liability for pre-existing conditions at the Project Site that were fully disclosed to Ironclad prior to the issuance of the Term Sheet.

MTDC proposes that the environmental indemnity carve-out be limited to losses arising from:

(i) the acts or omissions of Borrower, Guarantor, or their respective agents, employees, contractors, or tenants (collectively, the "Borrower Parties"), specifically excluding pre-existing environmental conditions at the Project Site (450 West 34th Street, New York, New York, Block 729, Lots 1, 5, 12, and 15) that were identified and disclosed in the Phase I Environmental Site Assessment prepared by Apex Environmental Consulting, LLC (Project No. AEC-NY-25-0337, dated March 20, 2025) (the "Phase I ESA"), which has been delivered to Ironclad as part of the due diligence materials; and

(ii) Borrower's failure to comply in all material respects with applicable Environmental Laws (as such term will be defined in the Loan Agreement, to include, without limitation, CERCLA, RCRA, the New York Environmental Conservation Law, the New York State Superfund Act, and applicable regulations thereunder).

Pre-existing environmental conditions at the Project Site that are disclosed in the Phase I ESA should be carved out from the recourse trigger, provided that Borrower complies with its obligation to remediate such conditions in accordance with applicable law and the terms of the Loan Agreement. This approach appropriately allocates the risk of pre-existing conditions—which are outside Borrower's control and were known to both parties at the time of the credit decision—while preserving Ironclad's protection against environmental harm caused by the Borrower Parties' own conduct or negligence.

F. Guarantor Scope

MTDC requests confirmation that recourse obligations under the Carve-Out Guaranty run to MTDC solely in its capacity as indirect equity owner and guarantor of the Mortgage Borrower, and not in any other capacity. In addition, MTDC requests that the Carve-Out Guaranty include a cap on aggregate guarantor liability equal to the lesser of:

(i) the then-outstanding principal balance of the Senior Mortgage Loan (including accrued and unpaid interest); and

(ii) $475,000,000 (the original principal amount of the Senior Mortgage Loan).

The foregoing cap would be exclusive of any environmental indemnity obligations, which MTDC acknowledges are customarily uncapped and which would be governed by a separate Environmental Indemnity Agreement to be negotiated and executed at closing. The guarantor liability cap is consistent with prevailing market practice and ensures that the Carve-Out Guaranty operates as a protection against borrower misconduct rather than as a mechanism for converting the entire loan into a full-recourse obligation against MTDC's general assets. MTDC notes that its net assets as of the most recent fiscal year (per the audited financial statements prepared by Whitfield Albrecht & Co. LLP for the fiscal year ended December 31, 2024) were approximately $3,700,000,000, and that MTDC carries a long-term issuer rating of A– from Pinnacle Ratings Group (identifier PRG-MTDC-A-2024-1187), which should provide Ironclad with substantial comfort as to the creditworthiness of the guarantor.

III. Cash Management and Cash Sweep Triggers (Term Sheet § 11)

MTDC acknowledges the importance of a robust cash management structure for a construction loan of this magnitude and appreciates Ironclad's focus on protecting the cash flows generated by the Project. MTDC's comments on the cash management provisions set forth in Section 11 of the Term Sheet are designed to achieve an appropriate balance between the Agent's need for cash flow visibility and control, on the one hand, and the Borrower's need for operational flexibility during the construction and lease-up phases of the Project, on the other.

A. Lockbox Structure

Section 11(a) of the Term Sheet requires the establishment of a hard lockbox with a springing cash sweep, effective from the Closing Date. Under this structure, all rents and revenues from the Project would be deposited directly into a lender-controlled lockbox account from and after closing, with funds swept into a cash management account controlled by Agent upon the occurrence of a Cash Sweep Trigger Event.

MTDC proposes instead a soft lockbox / springing hard lockbox structure, structured as follows:

(i) During the Construction Period (from the Closing Date through projected substantial completion on December 15, 2027): A soft lockbox in which rents and revenues (which are expected to be minimal during this period, as the Project will be under construction) are deposited into a Borrower-controlled operating account, with Borrower providing monthly reports to Agent regarding all deposits and disbursements. The Agent would have the right to direct tenants to deposit rents into the lockbox account upon the occurrence of a Trigger Event (as defined below), at which point the lockbox would convert to a hard lockbox.

(ii) Following Substantial Completion: The lockbox would convert to a hard lockbox upon the earlier of (a) substantial completion of the Project, as certified by the independent engineer, and (b) the date on which the first revenue from any portion of the Project (including any retail or commercial component that may be delivered prior to completion of the residential and office components) is generated and deposited.

The rationale for this structure is straightforward: during the construction period, the Project will generate little or no revenue, and operating costs will be funded from loan proceeds and equity contributions drawn down through the construction draw process. Imposing a hard lockbox during this phase creates unnecessary administrative burden and complexity without providing meaningful incremental protection to the Agent, since there will be no material cash flows to capture. The springing mechanism ensures that the hard lockbox is in place before any significant revenue is generated, providing full protection during the period when cash management is most critical.

B. Cash Sweep DSCR Trigger

Section 11(b) of the Term Sheet provides that a cash sweep will be triggered when the trailing-twelve-month combined DSCR falls below 1.10x. MTDC proposes the following modifications to this trigger:

(i) Reduced DSCR Sweep Trigger During Lease-Up. For the first eighteen (18) months following the issuance of the first TCO (projected March 15, 2028, through September 15, 2029), the DSCR sweep trigger should be reduced from 1.10x to 1.05x on a combined basis. This reduced trigger level during the initial lease-up period reflects the reality that net operating income will be increasing as new leases commence and tenants take occupancy, and a 1.10x combined DSCR may not be achievable during the earliest months of operation even under a base-case leasing scenario. Following the expiration of the eighteen (18)-month lease-up period, the DSCR sweep trigger would revert to 1.10x on a combined basis.

(ii) Testing Methodology. DSCR for cash sweep purposes should be tested on a quarterly basis (rather than monthly, which introduces unnecessary volatility into the testing regime) using a trailing-twelve-month period. If twelve (12) months of operating history are not yet available as of a given test date (which will be the case during the early quarters following first TCO), the DSCR should be calculated using an annualized figure based on the most recent available quarter or quarters of operating history. This is consistent with standard practice for transitional assets and newly completed projects and avoids the distortion that would result from using a short-period sample with seasonal or one-time variations.

(iii) Cash Sweep Cure Right. MTDC proposes the addition of a cure right permitting MTDC (as guarantor) or Borrower to deposit cash or deliver an irrevocable standby letter of credit into a lender-controlled sweep cure reserve account in an amount calculated by Agent as sufficient to achieve a pro forma combined DSCR of not less than 1.10x (or 1.05x during the lease-up period, as applicable). Upon the deposit of such amount (the "Sweep Cure Deposit"), the cash sweep would cease and excess cash flows would be distributed in accordance with the cash management waterfall described below. The Sweep Cure Deposit would be released to Borrower upon achievement of a trailing-twelve-month combined DSCR at or above the applicable sweep trigger level for two (2) consecutive calendar quarters. MTDC proposes that the Borrower be permitted to exercise this cure right on not more than two (2) occasions during the term of the Senior Mortgage Loan (excluding any extension periods, during which additional cure exercises would be available).

C. Cash Sweep EOD Trigger

Section 11(c) of the Term Sheet provides that a cash sweep will be triggered upon the occurrence and during the continuance of an Event of Default. MTDC does not object to this trigger, which is standard and appropriate. However, MTDC requests that the Term Sheet expressly provide that a cash sweep triggered by an Event of Default shall automatically terminate upon the satisfaction of each of the following conditions:

(i) the Event of Default giving rise to the cash sweep has been cured in full (to the extent such Event of Default is curable under the terms of the Loan Agreement);

(ii) no other Event of Default exists; and

(iii) Borrower has maintained compliance with all financial covenants set forth in the Loan Agreement (including the DSCR covenant, the LTV covenant, and any debt yield covenant) for two (2) consecutive calendar quarters following the date on which the Event of Default was cured.

This automatic termination mechanism ensures that a cured default does not permanently impair Borrower's cash flow rights and provides an appropriate transition period during which Agent can confirm that the Project is performing satisfactorily before cash flows are released.

D. Excess Cash Flow Waterfall

Section 11(d) of the Term Sheet references a cash management waterfall but does not specify the order of priority in which funds in the cash management account will be applied. MTDC requests that the definitive loan documents include a detailed waterfall provision substantially as follows:

(i) First: Payment of current monthly debt service on the Senior Mortgage Loan (interest and, if applicable, principal amortization);

(ii) Second: Funding of all required reserves, including the interest reserve, tax and insurance escrow, TI/LC reserve, CapEx reserve, and any other reserves required under the Loan Agreement;

(iii) Third: Payment of approved operating expenses and capital expenditures for the Project, in accordance with the approved annual operating budget;

(iv) Fourth: Payment of ground rent to New York City Economic Development Corporation ("NYCEDC") in the amount of $4,200,000 per annum (with CPI escalation every five (5) years), as required under the ground lease recorded with the New York City Register as CRFN 2020000198762 (the "Ground Lease");

(v) Fifth: Payment of current monthly debt service on the mezzanine loan from Granite Peak Capital Partners, LP, subject to the terms and conditions of the Intercreditor Agreement to be negotiated among Ironclad, Granite Peak, and the respective borrowers; and

(vi) Sixth: Distribution of all remaining excess cash flow to Borrower.

MTDC proposes that during a Cash Sweep Period (defined as any period during which a cash sweep is in effect as a result of a DSCR Trigger Event or an Event of Default Trigger Event), items (v) and (vi) above shall be swept into a lender-controlled reserve account in lieu of being distributed to Granite Peak or Borrower, as applicable. However, items (i) through (iv) shall continue to be released and applied in accordance with the waterfall at all times, including during a Cash Sweep Period, to ensure that senior debt service, required reserves, essential operating expenses, and ground rent obligations continue to be satisfied. The failure to pay ground rent, in particular, could give rise to a default under the Ground Lease and jeopardize the Borrower's leasehold interest in the Project, which would be adverse to the interests of all parties, including the Agent and the lending syndicate.

IV. Reserve Requirements (Term Sheet § 12)

MTDC recognizes that the reserve structure is a critical component of the credit facility and that Ironclad's reserve requirements reflect a conservative and prudent approach to construction lending. MTDC's comments on the reserve provisions set forth in Section 12 of the Term Sheet are intended to tailor the reserves to the specific characteristics and timeline of the Project, while maintaining appropriate protections for the Agent and the lending syndicate.

A. Interest Reserve

Section 12(a) of the Term Sheet requires a pre-funded interest reserve equal to twelve (12) months of projected debt service, to be fully funded at closing. Based on the pricing terms of the Senior Mortgage Loan (Term SOFR plus 425 basis points, with a SOFR Floor of 1.00%, resulting in an all-in interest rate of 5.25% at the Floor), twelve (12) months of projected interest on the full $475,000,000 commitment amount would be approximately $24,937,500 (subject to adjustment based on the actual drawn balance at any given time and prevailing SOFR rates).

MTDC proposes the following modification:

The pre-funded interest reserve at closing should be reduced to nine (9) months of projected interest (approximately $18,703,125 at the Floor rate on the full commitment amount), with the remaining three (3) months to be funded from operating income generated by the Project or, if necessary, from additional equity contributions by MTDC, as and when needed during the construction period. To provide additional comfort to the Agent, Borrower shall be required to replenish the interest reserve to twelve (12) months of projected interest in the event the reserve balance falls below six (6) months of projected interest at any quarterly test date. Such replenishment shall be made within thirty (30) days following Agent's written notice to Borrower that the minimum threshold has been breached.

This approach reduces the upfront equity requirement by approximately $6.2 million while preserving the Agent's downside protection through the replenishment mechanism. MTDC notes that its $200,000,000 equity commitment to the Project—which represents approximately 29.6% of total project costs—provides substantial additional cushion and demonstrates MTDC's alignment of interest with the lending syndicate.

B. Real Estate Tax and Insurance Escrow

MTDC does not object to the requirement set forth in Section 12(b) of the Term Sheet for monthly escrow deposits for real estate taxes and insurance premiums. MTDC requests, however, the following clarifications and modifications:

(i) RESPA Compliance. The escrow shall be administered in accordance with the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., and the regulations promulgated thereunder, to the extent applicable to the Senior Mortgage Loan. Ironclad shall remit escrow payments to the applicable taxing authority (the New York City Department of Finance) and to the applicable insurance carrier(s) on a timely basis, and shall provide Borrower with an annual escrow analysis statement as required by applicable law.

(ii) Waiver Upon Performance. MTDC proposes that the tax and insurance escrow requirement be waived upon Borrower's achievement of a combined DSCR of not less than 1.25x for two (2) consecutive calendar quarters, provided that Borrower provides Agent with evidence reasonably satisfactory to Agent that Borrower is paying real estate taxes and insurance premiums directly to the applicable payee on a timely basis. The waiver would continue so long as the combined DSCR remains at or above 1.25x and Borrower continues to provide evidence of timely direct payment. If the combined DSCR falls below 1.25x for any calendar quarter, the escrow requirement would be reinstated effective as of the first day of the next calendar quarter following Agent's written notice to Borrower.

C. Tenant Improvement / Leasing Commission Reserve

Section 12(c) of the Term Sheet requires a TI/LC reserve of $35.00 per rentable square foot ("RSF"), to be fully funded at closing. Based on the Project's approximately 1,200,000 RSF of leasable space across the office, retail, and residential components, a fully funded TI/LC reserve at $35.00/RSF would total approximately $42,000,000 at closing.

MTDC proposes a phased funding approach:

(i) Initial Funded Amount at Closing: $20.00 per RSF, totaling approximately $24,000,000. This initial funding level provides a substantial reserve for early leasing activity, including the execution of anchor tenant leases that MTDC expects to conclude prior to or shortly after substantial completion.

(ii) Monthly Deposits Following First TCO: Commencing upon the issuance of the first TCO (projected March 15, 2028), Borrower shall make monthly deposits into the TI/LC reserve in the amount of $1.25 per RSF (approximately $1,500,000 per month), until the aggregate amount in the TI/LC reserve (including the initial funded amount and all monthly deposits) reaches the target level of $35.00 per RSF. Based on this schedule, the reserve would reach the $35.00/RSF target within approximately twelve (12) months following first TCO.

The rationale for this phased approach is that pre-funding the full $42,000,000 at closing is unnecessary given that leasing activity—and the corresponding demand for tenant improvement allowances and leasing commissions—will not meaningfully commence until after substantial completion of the Project. Requiring the full TI/LC reserve at closing increases the upfront equity requirement without providing incremental protection during the construction period, when the reserve funds would be sitting idle in a lender-controlled account. The phased approach aligns the reserve build-up with the actual leasing timeline while ensuring that the full target reserve is in place before the peak leasing period.

D. Capital Expenditure Reserve

Section 12(d) of the Term Sheet requires a capital expenditure ("CapEx") reserve of $0.50 per RSF per annum, funded through monthly deposits commencing at closing. MTDC proposes the following modification:

The CapEx reserve obligation should not commence until the earlier of (i) twenty-four (24) months after the issuance of the first TCO (projected September 15, 2030, based on a first TCO date of March 15, 2028) or (ii) the date on which the Project achieves seventy-five percent (75%) economic occupancy (calculated based on leases executed and in occupancy or with rent commencement dates within sixty (60) days).

The Project will be new construction, and upon completion, all building systems, structural components, and tenant improvements will be subject to comprehensive manufacturer's warranties and the general contractor's warranty obligations under the $412,000,000 guaranteed maximum price ("GMP") contract with Cobalt Construction Group, Inc. (Contract No. CCG-HYW-2025-001). During the initial years of operation, capital expenditure needs are expected to be minimal, as any defects or deficiencies will be covered under the applicable warranty programs. Requiring CapEx reserve deposits from the Closing Date—before construction has even been completed—imposes an unnecessary cash burden on the Project with no corresponding benefit to the Agent.

E. Completion / Performance Reserve

Section 12(e) of the Term Sheet requires a completion guaranty reserve equal to ten percent (10%) of the remaining construction budget at each quarterly test date. This reserve is designed to ensure that sufficient funds are available to complete construction of the Project in the event of a cost overrun or contractor default.

MTDC proposes the following alternative approaches:

Primary Proposal: Reduce the completion reserve requirement from 10% of the remaining total construction budget to 5% of the remaining hard-cost budget only, excluding soft costs (architectural, engineering, legal, and other professional fees), financing costs (loan interest, fees, and closing costs), and contingency amounts. The hard-cost budget is the component of the construction budget most directly related to the physical completion of the Project and is the appropriate reference point for a completion reserve. Soft costs and financing costs are ongoing obligations that will be incurred regardless of the status of construction, and the contingency is itself a form of reserve. Including these categories in the completion reserve base results in a reserve that is disproportionate to the actual risk of non-completion. MTDC notes that its $200,000,000 equity commitment, the $412,000,000 GMP contract with Cobalt Construction Group (which includes a contractor performance bond), and the 5% contingency already included in the construction budget collectively provide substantial protection against completion risk.

Alternative Proposal: In lieu of a cash reserve, MTDC proposes to deliver a completion guaranty from MTDC, in form and substance reasonably acceptable to Agent, guaranteeing the lien-free completion of the Project in accordance with the approved plans and specifications and the approved construction budget. MTDC's net assets of approximately $3,700,000,000 (per the audited financial statements prepared by Whitfield Albrecht & Co. LLP for the fiscal year ended December 31, 2024) and its Pinnacle Ratings Group long-term issuer rating of A– (identifier PRG-MTDC-A-2024-1187) provide strong credit support for a completion guaranty of this nature. The completion guaranty would terminate upon the achievement of substantial completion, issuance of the TCO, and satisfaction of the other completion conditions to be specified in the Loan Agreement.

F. Ground Lease Reserve

To the extent Ironclad requires a ground lease reserve to protect against the risk of a default under the Ground Lease, MTDC proposes the following:

(i) The ground lease reserve should be limited to six (6) months of ground rent, equal to $2,100,000 (based on current annual ground rent of $4,200,000 payable to NYCEDC under the Ground Lease).

(ii) Borrower should be permitted to satisfy the ground lease reserve requirement by delivering an irrevocable standby letter of credit from a qualified financial institution (with a long-term unsecured debt rating of at least A– from Pinnacle Ratings Group or equivalent) in the amount of $2,100,000, in lieu of a cash deposit. The letter of credit would be drawable by Agent upon written notice that Borrower has failed to make any ground rent payment within the applicable grace period under the Ground Lease.

A six-month reserve provides Agent with ample time to step in and cure any ground rent default, preserving the Borrower's leasehold interest, while avoiding the need to tie up cash that could be more productively deployed in the construction and leasing of the Project. The letter of credit option provides additional flexibility to the Borrower without diminishing the Agent's protection.

V. Additional Observations

In addition to the foregoing comments on Sections 5, 9, 11, and 12 of the Term Sheet, MTDC wishes to flag the following items, which it intends to address in the negotiation of the definitive loan documents but does not propose to resolve at the term sheet stage:

• Intercreditor Agreement. The terms of the Intercreditor Agreement between Ironclad (as Agent for the senior lending syndicate) and Granite Peak Capital Partners, LP (as mezzanine lender) will need to be negotiated and agreed upon as a condition to closing. MTDC understands that Granite Peak's mezzanine term sheet, dated March 7, 2025, has been delivered to Ironclad for review. Coordination among Clearfield & Associates LLP (as senior lender's counsel), VanRhein Bloch LLP (as mezzanine lender's counsel), and Calderwood & Harkness LLP (as borrower's counsel) will be required to negotiate and finalize the Intercreditor Agreement, and MTDC proposes that the parties schedule an initial intercreditor call during the week of March 10, 2025.

• Permitted Transfers. The definition and scope of Permitted Transfers will need to be addressed in the definitive Loan Agreement. MTDC expects to request that Permitted Transfers include, among others, transfers among MTDC affiliates, admissions of additional equity participants holding minority interests, estate planning transfers, and transfers of non-controlling interests, in each case subject to customary conditions including Agent notice, maintenance of SPE status, and compliance with "know your customer" and anti-money laundering requirements.

• Construction Draw Procedures. The definitive Loan Agreement will need to include detailed provisions governing construction draw requests, including the role and authority of the independent engineer (to be retained by Agent at Borrower's expense), approval thresholds for change orders, retainage requirements, and conditions to each disbursement. MTDC requests that the parties discuss these provisions early in the documentation process to ensure alignment with the construction schedule and the terms of the GMP contract with Cobalt Construction Group.

• Prepayment Terms. MTDC notes that the Term Sheet provides for a 0.25% exit fee on prepayment of the Senior Mortgage Loan. MTDC intends to negotiate the terms and conditions of prepayment, including any applicable prepayment lockout periods, yield maintenance or defeasance requirements, and the circumstances under which the exit fee may be reduced or waived (e.g., in connection with a refinancing with Ironclad or a member of the lending syndicate).

• Insurance Requirements. The Term Sheet references insurance requirements that will be specified in the definitive Loan Agreement. MTDC notes that builder's risk coverage in the amount of $500,000,000 (full replacement cost) has been bound with Fortis Indemnity Corp., brokered by Castleton Risk Advisors, LLC, and that operational coverages (including commercial general liability, property, business interruption, and umbrella/excess policies) will be procured in connection with the transition from construction to operations. MTDC requests that the insurance requirements in the Loan Agreement be consistent with the coverages available in the current market and with the standards customarily required for Class A mixed-use developments in Manhattan.

MTDC's outside auditors (Whitfield Albrecht & Co. LLP) and tax counsel (Sylvia Hartwell of Calderwood & Harkness LLP) are available to address any questions that Ironclad or its counsel may have regarding MTDC's financial statements, tax structure, or organizational documents.

We appreciate Ironclad's willingness to engage constructively in the negotiation of the Term Sheet and the definitive loan documents, and we are confident that the comments set forth in this letter can be resolved in a manner that is satisfactory to all parties. MTDC remains firmly committed to the objective of closing the Senior Mortgage Loan on or before the target closing date of June 15, 2025, and is prepared to dedicate the resources necessary to achieve that timeline.

We propose a telephone call or in-person meeting during the week of March 3, 2025, to discuss the comments set forth in this letter and to establish a schedule for the preparation and negotiation of the definitive loan documents. We would ask that Ironclad share its response to these comments with both Calderwood & Harkness LLP and MTDC's in-house legal team, including Lydia Okafor, General Counsel of MTDC, who will be actively involved in the documentation process.

A redlined copy of the Term Sheet reflecting the proposed revisions described in this letter is enclosed for your reference and review.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Fairchild, Partner Real Estate Department One Liberty Plaza, 55th Floor New York, New York 10006 Direct: (212) 455-7148

Email: dfairchild@calderwoodharkness.com

cc: Harrison Whitmore, Esq., Clearfield & Associates LLP (via email) David Harrington, Metropolitan Transit Development Corp. (via email) Lydia Okafor, Metropolitan Transit Development Corp. (via email) Marcus Jennings, Metropolitan Transit Development Corp. (via email) Priya Subramanian, Metropolitan Transit Development Corp. (via email)

Enclosure: Redline of Senior Mortgage Loan Term Sheet dated February 28, 2025, reflecting MTDC's proposed revisions

CALDERWOOD & HARKNESS LLP Attorneys at Law
One Liberty Plaza, 55th Floor New York, New York 10006
Telephone: (212) 455-7000 Facsimile: (212) 455-7001 www.calderwoodharkness.com
Douglas Fairchild Partner — Real Estate Direct: (212) 455-7148 dfairchild@calderwoodharkness.com
March 1, 2025
Via Email and First-Class Mail
Kenneth Pryor, Managing Director Real Estate Finance Ironclad National Bank, N.A. 277 Park Avenue, 38th Floor New York, New York 10172
Samantha Bledsoe, Vice President Loan Originations Ironclad National Bank, N.A. 277 Park Avenue, 38th Floor New York, New York 10172
Re: Metropolitan Transit Development Corp. — Senior Mortgage Loan ($475,000,000) — Hudson Yards West Project, 450 West 34th Street, New York, New York 10001 (the "Project") — Comments on Term Sheet dated February 28, 2025 — C&H Matter No. 1031-00004
Dear Mr. Pryor and Ms. Bledsoe:
We are counsel to Metropolitan Transit Development Corp., a Delaware corporation ("MTDC"), in connection with the proposed $475,000,000 senior mortgage construction loan (the "Senior Mortgage Loan") to be made by Ironclad National Bank, N.A. ("Ironclad" or the "Agent"), as administrative agent for the syndicate of lenders to be formed, to Hudson Yards West Mortgage LLC (the "Mortgage Borrower" or "HYW Mortgage LLC"), a Delaware limited liability company and indirect subsidiary of MTDC, for the purpose of financing the development of the Hudson Yards West mixed-use development located at 450 West 34th Street, New York, New York 10001 (the "Project"). We write with reference to the executed term sheet dated February 28, 2025 (the "Term Sheet") between MTDC and Ironclad setting forth the principal economic and structural terms of the Senior Mortgage Loan.
At the outset, we wish to acknowledge the productive discussions between the parties to date and to express MTDC's continued commitment to finalizing definitive loan documents on a timeline consistent with the target closing date of June 15, 2025. MTDC has reviewed the Term Sheet in detail with its in-house legal, finance, and development teams, and this letter transmits MTDC's principal comments on and requested revisions to four key areas of the Term Sheet: (I) Extension Conditions (Term Sheet § 5); (II) Recourse Carve-Out Exceptions (Term Sheet § 9); (III) Cash Management and Cash Sweep Triggers (Term Sheet § 11); and (IV) Reserve Requirements (Term Sheet § 12). MTDC expressly reserves the right to raise additional comments and to propose further revisions in connection with the negotiation of the definitive loan documents, including but not limited to the Loan Agreement, the Mortgage, the Environmental Indemnity Agreement, the Guaranty, and the Intercreditor Agreement.
Capitalized terms used but not otherwise defined in this letter carry the meanings ascribed to them in the Term Sheet. For your convenience, a redline of the Term Sheet reflecting the proposed revisions discussed herein is enclosed as an attachment to this letter.
Our comments are set forth below.
I. Extension Conditions (Term Sheet § 5)
The Term Sheet provides for a four (4)-year initial term commencing on the Closing Date and maturing on June 15, 2029 (the "Initial Maturity Date"), with two (2) successive one (1)-year extension options available at Borrower's election (the "First Extension Option" and the "Second Extension Option," respectively, and each, an "Extension Option"), subject to the satisfaction of certain conditions. If both Extension Options are exercised, the First Extension Maturity Date would be June 15, 2030, and the Final Extended Maturity Date would be June 15, 2031. MTDC does not take issue with the overall term structure or the availability of two extension periods, but respectfully requests the following modifications to the conditions precedent to the exercise of each Extension Option.
A. No Event of Default — Proposed Cure Right
Section 5(a) of the Term Sheet provides that the exercise of each Extension Option is conditioned upon there being no Event of Default existing at the time of the delivery of the Extension Notice or at the commencement of the applicable extension period. MTDC does not object to the fundamental principle underlying this condition, which is standard in facilities of this nature. However, as currently drafted, the provision could be read to bar the exercise of an Extension Option even where a technical or readily curable default exists and the applicable notice and cure periods have not yet expired, or where a default has been identified and is in the process of being remedied in good faith.
MTDC respectfully requests that Section 5(a) be revised to provide that the Extension Option may be exercised so long as no Event of Default exists that has not been cured within any applicable notice and cure period provided under the Loan Agreement, including any cure period that is then running at the time of the delivery of the Extension Notice. Specifically, MTDC proposes that:
(i) a monetary default that is curable within five (5) business days after notice thereof from Agent to Borrower shall not bar the exercise of an Extension Option, provided that such monetary default is cured in full prior to the commencement of the applicable extension period; and
(ii) a non-monetary default that is curable within thirty (30) days after notice thereof from Agent to Borrower (or such longer period as may be reasonably necessary to effectuate a cure, provided Borrower has commenced such cure within such thirty (30)-day period and is diligently pursuing the same) shall not bar the exercise of an Extension Option, provided that such non-monetary default is cured in full prior to the commencement of the applicable extension period.
This approach is consistent with prevailing market practice in New York construction loan financings and recognizes that mechanical or minor defaults should not deprive the Borrower of the benefit of an extension right that is otherwise a fundamental economic term of the credit facility. We note that similar cure-right protections were incorporated in several recent comparable transactions in the Hudson Yards corridor, and we believe this formulation appropriately balances the Agent's interest in ensuring a performing credit against the Borrower's legitimate expectation of certainty with respect to the availability of the Extension Options.
B. DSCR Test at Extension
Section 5(b) of the Term Sheet provides that, as a condition to the exercise of each Extension Option, the Borrower must demonstrate a trailing-twelve-month Debt Service Coverage Ratio ("DSCR") of not less than 1.20x on a combined basis (i.e., taking into account both the Senior Mortgage Loan and the mezzanine indebtedness held by Granite Peak Capital Partners, LP). MTDC understands and appreciates Ironclad's focus on debt service coverage as a measure of the Project's performance, but believes that the 1.20x threshold is more appropriately applied as an ongoing covenant during the stabilized operating period rather than as a condition to the exercise of the Extension Options.
The extension periods are designed to provide the Borrower with additional time to achieve stabilized occupancy and operations. Projected substantial completion of the Project is December 15, 2027, with the first Temporary Certificate of Occupancy ("TCO") projected for March 15, 2028. Accordingly, the First Extension Option (exercisable for the period from June 15, 2029 to June 15, 2030) coincides directly with the lease-up phase of the Project, during which occupancy levels and rental income are anticipated to be ramping toward — but may not yet have achieved — the stabilized levels reflected in the MTDC business plan and the underwriting assumptions utilized by Ironclad's credit committee. It would be commercially unreasonable to apply the full stabilized-period DSCR standard to a period during which the Project is, by design, still in its initial lease-up trajectory.
MTDC proposes the following alternatives:
Primary Proposal: Reduce the extension DSCR threshold from 1.20x to 1.15x on a combined basis for purposes of the Extension Option conditions. The 1.20x level would continue to apply as the ongoing DSCR covenant during the extension periods themselves, but the entry condition to exercise the Extension Option would be set at 1.15x to provide a reasonable cushion for the lease-up dynamics described above.
Alternative Proposal: In the event that the trailing-twelve-month combined DSCR at the applicable extension date falls between 1.10x and 1.15x, MTDC proposes that the Borrower be permitted to exercise the Extension Option upon delivery of an additional cash deposit or irrevocable standby letter of credit (the "DSCR Shortfall Deposit") into a lender-controlled reserve account in an amount calculated by Agent as sufficient to achieve a pro forma combined DSCR of not less than 1.15x for the ensuing twelve (12)-month period. The DSCR Shortfall Deposit would be released to Borrower upon achievement of a trailing-twelve-month combined DSCR of 1.15x or greater for two (2) consecutive calendar quarters during the applicable extension period.
Either of these formulations would provide Ironclad with meaningful downside protection while preserving the commercial utility of the Extension Options for a project in its lease-up phase. MTDC believes this approach is consistent with the underwriting assumptions reflected in the credit memorandum and with the parties' shared expectation that the Project will achieve stabilized occupancy within approximately twenty-four (24) to thirty (30) months following first TCO.
C. LTV Test at Extension
Section 5(c) of the Term Sheet requires that the combined Loan-to-Value Ratio ("LTV") not exceed 70.0% as of each extension date, calculated on a combined basis inclusive of the mezzanine financing. MTDC does not object to the 70.0% threshold, which it views as reasonable for a project of this scale and quality, but does take issue with the methodology for determining value at the time of extension.
As currently drafted, the Term Sheet is ambiguous as to whether the LTV test at extension will be measured against the original appraised value reflected in the appraisal to be prepared by Broadstreet Appraisal Group (File No. BAG-25-1092, dated April 1, 2025, reflecting a projected "as-stabilized" value of $1,025,000,000) or against an updated appraisal obtained closer to the extension date. MTDC strongly believes that the LTV test at extension should reflect the actual value of the Project at the time the Extension Option is exercised, which may be materially higher than the original appraised value given anticipated construction progress, lease executions, and market conditions.
Accordingly, MTDC requests that Section 5(c) be revised to provide that, for purposes of the LTV test at each extension date, the value of the Project shall be determined by reference to a then-current appraisal prepared by a nationally recognized appraiser selected by Ironclad (which may be Broadstreet Appraisal Group or another appraiser reasonably acceptable to Borrower), obtained at Borrower's expense, and dated not more than ninety (90) days prior to the applicable extension date. The appraisal shall be prepared in accordance with the Uniform Standards of Professional Appraisal Practice ("USPAP") and shall employ an "as-is" valuation methodology (or, if the Project has not yet achieved stabilized occupancy, an "as-stabilized" methodology with an appropriate discount to present value). This approach ensures that the LTV test accurately reflects the condition and value of the Project at the relevant time, rather than relying on a potentially stale appraisal that does not account for intervening construction completion, leasing activity, or changes in the New York commercial real estate market.
D. Interest Rate Protection
Section 5(d) of the Term Sheet requires, as a condition to each Extension Option, that Borrower deliver an interest rate cap agreement with a notional amount equal to the then-outstanding principal balance of the Senior Mortgage Loan for the duration of the applicable extension period. MTDC does not object to this condition, which is standard and commercially appropriate given the floating-rate structure of the Senior Mortgage Loan. However, MTDC has concerns regarding the provision as drafted, which states that the required strike rate for the interest rate cap shall be "determined by Agent in its sole discretion."
Sole-discretion strike rate determination introduces unacceptable uncertainty into the economics of the Extension Options and effectively permits Ironclad to impose an economic condition on extension that is not knowable at the time of closing. MTDC proposes that Section 5(d) be revised to provide that the required strike rate for the interest rate cap agreement shall be set at the greater of:
(i) the then-current Term SOFR rate (as determined two (2) business days prior to the commencement of the applicable extension period) plus two hundred (200) basis points; and
(ii) five and one-quarter percent (5.25%).
This formulation provides certainty to both parties regarding the minimum protection level required while also ensuring that the cap provides meaningful coverage above prevailing rates. MTDC further proposes that the interest rate cap provider be required to carry a long-term unsecured debt rating of at least A– from Pinnacle Ratings Group (or the equivalent rating from a nationally recognized statistical rating organization), which is consistent with the cap counterparty requirements in comparable recent transactions. The form of the interest rate cap confirmation shall be reasonably acceptable to both Borrower and Agent.
E. Extension Fee
Section 5(e) of the Term Sheet provides for an extension fee equal to twenty-five basis points (0.25%) of the then-outstanding principal balance of the Senior Mortgage Loan, payable upon the exercise of each Extension Option. MTDC proposes that the extension fee be reduced as follows:
(i) First Extension Option: Fifteen basis points (0.15%) of the then-outstanding principal balance; and
(ii) Second Extension Option: Twenty basis points (0.20%) of the then-outstanding principal balance.
Based on MTDC's review of recent comparable construction loan transactions in the New York metropolitan area for mixed-use developments in excess of $400,000,000, the prevailing market range for extension fees is between 0.10% and 0.25%, with a weighted average closer to 0.15% for first extensions and 0.20% for second extensions. The tiered structure proposed by MTDC reflects the increased credit risk and administrative cost associated with a second extension while appropriately recognizing the lower incremental risk of a first extension following the construction period. We would be happy to share additional market data with Ironclad's team on a confidential basis if that would be helpful.
F. Extension Notice Period
Section 5(f) of the Term Sheet requires that the Extension Notice be delivered not less than ninety (90) days prior to the then-current maturity date. MTDC proposes that this notice period be shortened to not less than sixty (60) days prior to the then-current maturity date.
A sixty (60)-day notice period is standard in construction loan facilities of this type and provides MTDC with the flexibility to evaluate market conditions, leasing performance, and refinancing alternatives before committing to an extension and incurring the associated extension fee and interest rate cap costs. A ninety (90)-day requirement, by contrast, requires the Borrower to make a binding commitment to extension at a point when the relevant data—including trailing DSCR performance, leasing velocity, and prevailing capital markets conditions—may not yet be available for the period most proximate to the extension date. MTDC acknowledges that Ironclad has legitimate administrative and regulatory reasons for requiring advance notice, and MTDC believes that sixty (60) days provides ample time for Ironclad to plan for the extension, coordinate with the lending syndicate, and satisfy any internal reporting or approval requirements.
II. Recourse Carve-Out Exceptions (Term Sheet § 9)
MTDC acknowledges and accepts the non-recourse structure of the Senior Mortgage Loan, with Borrower's liability limited to its interest in the Project and the other collateral pledged to secure the Senior Mortgage Loan, subject to certain standard exceptions (the "Recourse Carve-Outs" or "bad boy" carve-outs) set forth in Section 9 of the Term Sheet. MTDC further acknowledges that MTDC will execute a guaranty of payment and performance with respect to the Recourse Carve-Outs (the "Carve-Out Guaranty") at closing.
While the general framework of the Recourse Carve-Outs is consistent with market practice, several of the enumerated carve-outs as drafted in the Term Sheet are overbroad in scope and do not contain the qualifications and limitations that are customary in non-recourse construction loans of this size in the current market. MTDC's comments on each of the principal Recourse Carve-Outs are set forth below. It is important that these provisions be narrowed at the term sheet level so that they can be properly documented in the definitive agreements without protracted negotiation.
A. Voluntary Bankruptcy Filing — SPE Qualifier
Section 9(a)(i) of the Term Sheet provides that a voluntary bankruptcy filing by the Borrower under any chapter of Title 11 of the United States Code (or any state-law equivalent) shall constitute a full-recourse trigger, rendering the entire outstanding principal balance of the Senior Mortgage Loan, together with all accrued interest, fees, and other amounts, recourse to the Carve-Out Guarantor.
MTDC does not object to this carve-out, which is standard and appropriate. However, MTDC requests that the following clarifications be incorporated:
(i) The voluntary bankruptcy filing carve-out should apply solely to a voluntary filing by the Mortgage Borrower (HYW Mortgage LLC) itself, and not to a voluntary filing by MTDC, any MTDC affiliate, or any other entity in the organizational chain above the Mortgage Borrower. The non-recourse structure contemplates that the Mortgage Borrower is a single-purpose entity ("SPE") whose sole asset is the Project, and the bankruptcy carve-out is designed to ensure that the Borrower does not seek to defeat Ironclad's remedies by placing that SPE into bankruptcy. A filing by MTDC or another affiliated entity that does not directly affect the Mortgage Borrower or the Project should not trigger full recourse under the Senior Mortgage Loan.
(ii) The Term Sheet and the definitive documents should specifically reference and incorporate the independent director/manager provisions that will be included in the organizational documents of HYW Mortgage LLC as a structural protection against voluntary bankruptcy filings. As is customary, the operating agreement of HYW Mortgage LLC will provide that no voluntary bankruptcy filing may be authorized without the prior written consent of at least one (1) independent director/manager who has no economic interest in the Borrower or its affiliates. MTDC believes that the presence of this structural protection further supports the narrowing of the carve-out to filings by the Mortgage Borrower itself.
B. Fraud and Intentional Misrepresentation — Materiality / Knowledge Qualifier
Section 9(a)(ii) of the Term Sheet provides that any fraud or intentional misrepresentation by Borrower, Guarantor, or their respective agents in connection with the Senior Mortgage Loan shall constitute a full-recourse trigger. As drafted, this carve-out contains no materiality qualifier and no knowledge standard, meaning that any misstatement—regardless of magnitude, impact, or the knowledge or intent of the party making it—could theoretically give rise to full recourse on a $475,000,000 credit facility.
MTDC requests the following revisions:
(i) Materiality Qualifier. The carve-out should be revised to apply to "material fraud or intentional material misrepresentation" rather than to any fraud or misrepresentation without regard to magnitude. This is not intended to excuse genuine fraud, which MTDC agrees should carry the most serious consequences. Rather, the materiality qualifier is designed to prevent the carve-out from being triggered by immaterial or technical inaccuracies in the extensive representations and warranties that will be included in the Loan Agreement. In a transaction of this complexity, involving hundreds of representations spanning environmental, zoning, title, organizational, financial, and construction matters, it is virtually inevitable that minor inaccuracies will arise despite the exercise of good faith and reasonable diligence. Full recourse should be reserved for conduct that is genuinely fraudulent and that has a material adverse effect on the value of the Project, the collateral, or Ironclad's security interest therein.
(ii) Knowledge Qualifier. The carve-out should include a knowledge qualifier, providing that it applies to misrepresentations "known to Borrower or Guarantor" (or, if applicable, "known to the officers, directors, or principals of Borrower or Guarantor having direct responsibility for the administration of the Senior Mortgage Loan"). This qualifier would exclude from the ambit of the carve-out innocent or inadvertent misstatements in representations that are later determined to be inaccurate without the knowledge or intent of the Borrower or Guarantor. The knowledge qualifier is not intended to and would not protect against actual fraud, which by definition involves intentional conduct.
The combination of a materiality qualifier and a knowledge qualifier is widely accepted in the New York market for non-recourse construction loans of this type and reflects the fundamental principle that the Recourse Carve-Outs are intended to address egregious "bad acts" by the borrower, not to convert a non-recourse loan into a recourse obligation through the operation of minor, good-faith errors.
C. Misapplication / Misappropriation of Funds
Section 9(a)(iii) of the Term Sheet provides that any misapplication or misappropriation by Borrower of (i) insurance proceeds, (ii) condemnation awards, or (iii) rents, revenues, and security deposits shall constitute a full-recourse trigger. MTDC acknowledges that the protection of insurance proceeds and condemnation awards is of critical importance to the Agent, as these funds represent a substitute for the collateral and must be applied in accordance with the terms of the Loan Agreement. Similarly, MTDC understands the Agent's interest in ensuring that rents and revenues generated by the Project are applied to debt service and approved operating expenses.
However, as drafted, the carve-out contains no de minimis threshold, no notice or cure period, and no exception for ordinary-course operating expenditures, which creates a risk that routine operational decisions—including the application of funds to Project-related expenses that may not have received prior Agent approval due to timing or administrative delays—could be characterized as a "misapplication" triggering full recourse. MTDC respectfully requests the following modifications:
(i) De Minimis Basket for Rents and Revenues. MTDC proposes that a threshold of $500,000 be added with respect to the misapplication of rents and revenues (but not insurance proceeds or condemnation awards, for which MTDC does not seek a threshold), below which the carve-out would not be triggered. This de minimis basket is appropriate given the scale of the Project and the Senior Mortgage Loan and is designed to ensure that minor, good-faith accounting discrepancies or timing differences in the application of rental income do not give rise to disproportionate recourse consequences.
(ii) Notice and Cure Period. MTDC proposes that Borrower be afforded a fifteen (15)-day notice and cure period, commencing upon written notice from Agent to Borrower specifying the alleged misapplication, during which Borrower may restore the misapplied funds to the applicable account or otherwise cure the misapplication. If the misapplication is cured in full within such fifteen (15)-day period, the carve-out would not be triggered. This cure right is consistent with the general approach taken throughout the Term Sheet of affording Borrower a reasonable opportunity to cure defaults before the imposition of the most severe consequences.
(iii) Ordinary Course Operating Expenses. MTDC proposes that amounts applied to Project-related operating expenses in the ordinary course of business be excluded from the definition of "misapplication," even if such amounts were applied without prior Agent approval, provided that Borrower notifies Agent of such application within ten (10) business days following the date of such application and provides reasonable supporting documentation. This exclusion recognizes the practical reality that, in the operation of a large-scale mixed-use development, certain operating expenditures—including emergency repairs, utility payments, and other time-sensitive costs—must be made promptly and may not always be subject to prior Agent approval due to the exigencies of day-to-day property management.
D. Unauthorized Transfer or Encumbrance
Section 9(a)(iv) of the Term Sheet provides that any transfer of the Project or any direct or indirect interest in the Borrower, or any encumbrance of the Project or any such interest, without the prior written consent of Agent, shall constitute a full-recourse trigger. MTDC acknowledges that due-on-sale and due-on-encumbrance protections are essential components of the Agent's credit underwriting and that unauthorized transfers or encumbrances that could impair the value of the collateral or the creditworthiness of the borrowing entity should appropriately give rise to recourse consequences.
However, as drafted, the carve-out is not limited to material transfers or encumbrances and does not exclude Permitted Transfers (to be defined in the Loan Agreement), which could result in full recourse being triggered by minor, immaterial, or expressly contemplated transactions. MTDC requests the following modifications:
(i) The transfer and encumbrance carve-out should be triggered only by a "material" unauthorized transfer or encumbrance. For this purpose, MTDC proposes that a "material" transfer or encumbrance be defined as one involving consideration or indebtedness in excess of $1,000,000, or any direct or indirect transfer of a controlling interest in HYW Mortgage LLC (defined as a transfer that results in a change in the identity of the Person exercising day-to-day management and operational control over the Mortgage Borrower or the Project).
(ii) Permitted Transfers, as such term will be defined in the Loan Agreement, should be expressly excluded from the scope of the carve-out. MTDC anticipates that the definition of Permitted Transfers will address, among other things, intra-family transfers, transfers to and among MTDC affiliates, estate planning transfers, and admissions of additional equity participants, in each case subject to customary conditions and Agent notification requirements.
E. Environmental Liability
Section 9(a)(v) of the Term Sheet provides that Borrower and Guarantor shall be liable on a recourse basis for any losses, costs, damages, or liabilities arising out of or relating to the presence, release, or threatened release of Hazardous Materials at, on, under, or from the Project, or any violation of Environmental Laws applicable to the Project. MTDC acknowledges that an environmental indemnity is a standard and appropriate component of a non-recourse construction loan and does not seek to eliminate this carve-out. However, as drafted, the carve-out is not limited to environmental conditions caused by or attributable to Borrower or Guarantor and could impose recourse liability for pre-existing conditions at the Project Site that were fully disclosed to Ironclad prior to the issuance of the Term Sheet.
MTDC proposes that the environmental indemnity carve-out be limited to losses arising from:
(i) the acts or omissions of Borrower, Guarantor, or their respective agents, employees, contractors, or tenants (collectively, the "Borrower Parties"), specifically excluding pre-existing environmental conditions at the Project Site (450 West 34th Street, New York, New York, Block 729, Lots 1, 5, 12, and 15) that were identified and disclosed in the Phase I Environmental Site Assessment prepared by Apex Environmental Consulting, LLC (Project No. AEC-NY-25-0337, dated March 20, 2025) (the "Phase I ESA"), which has been delivered to Ironclad as part of the due diligence materials; and
(ii) Borrower's failure to comply in all material respects with applicable Environmental Laws (as such term will be defined in the Loan Agreement, to include, without limitation, CERCLA, RCRA, the New York Environmental Conservation Law, the New York State Superfund Act, and applicable regulations thereunder).
Pre-existing environmental conditions at the Project Site that are disclosed in the Phase I ESA should be carved out from the recourse trigger, provided that Borrower complies with its obligation to remediate such conditions in accordance with applicable law and the terms of the Loan Agreement. This approach appropriately allocates the risk of pre-existing conditions—which are outside Borrower's control and were known to both parties at the time of the credit decision—while preserving Ironclad's protection against environmental harm caused by the Borrower Parties' own conduct or negligence.
F. Guarantor Scope
MTDC requests confirmation that recourse obligations under the Carve-Out Guaranty run to MTDC solely in its capacity as indirect equity owner and guarantor of the Mortgage Borrower, and not in any other capacity. In addition, MTDC requests that the Carve-Out Guaranty include a cap on aggregate guarantor liability equal to the lesser of:
(i) the then-outstanding principal balance of the Senior Mortgage Loan (including accrued and unpaid interest); and
(ii) $475,000,000 (the original principal amount of the Senior Mortgage Loan).
The foregoing cap would be exclusive of any environmental indemnity obligations, which MTDC acknowledges are customarily uncapped and which would be governed by a separate Environmental Indemnity Agreement to be negotiated and executed at closing. The guarantor liability cap is consistent with prevailing market practice and ensures that the Carve-Out Guaranty operates as a protection against borrower misconduct rather than as a mechanism for converting the entire loan into a full-recourse obligation against MTDC's general assets. MTDC notes that its net assets as of the most recent fiscal year (per the audited financial statements prepared by Whitfield Albrecht & Co. LLP for the fiscal year ended December 31, 2024) were approximately $3,700,000,000, and that MTDC carries a long-term issuer rating of A– from Pinnacle Ratings Group (identifier PRG-MTDC-A-2024-1187), which should provide Ironclad with substantial comfort as to the creditworthiness of the guarantor.
III. Cash Management and Cash Sweep Triggers (Term Sheet § 11)
MTDC acknowledges the importance of a robust cash management structure for a construction loan of this magnitude and appreciates Ironclad's focus on protecting the cash flows generated by the Project. MTDC's comments on the cash management provisions set forth in Section 11 of the Term Sheet are designed to achieve an appropriate balance between the Agent's need for cash flow visibility and control, on the one hand, and the Borrower's need for operational flexibility during the construction and lease-up phases of the Project, on the other.
A. Lockbox Structure
Section 11(a) of the Term Sheet requires the establishment of a hard lockbox with a springing cash sweep, effective from the Closing Date. Under this structure, all rents and revenues from the Project would be deposited directly into a lender-controlled lockbox account from and after closing, with funds swept into a cash management account controlled by Agent upon the occurrence of a Cash Sweep Trigger Event.
MTDC proposes instead a soft lockbox / springing hard lockbox structure, structured as follows:
(i) During the Construction Period (from the Closing Date through projected substantial completion on December 15, 2027): A soft lockbox in which rents and revenues (which are expected to be minimal during this period, as the Project will be under construction) are deposited into a Borrower-controlled operating account, with Borrower providing monthly reports to Agent regarding all deposits and disbursements. The Agent would have the right to direct tenants to deposit rents into the lockbox account upon the occurrence of a Trigger Event (as defined below), at which point the lockbox would convert to a hard lockbox.
(ii) Following Substantial Completion: The lockbox would convert to a hard lockbox upon the earlier of (a) substantial completion of the Project, as certified by the independent engineer, and (b) the date on which the first revenue from any portion of the Project (including any retail or commercial component that may be delivered prior to completion of the residential and office components) is generated and deposited.
The rationale for this structure is straightforward: during the construction period, the Project will generate little or no revenue, and operating costs will be funded from loan proceeds and equity contributions drawn down through the construction draw process. Imposing a hard lockbox during this phase creates unnecessary administrative burden and complexity without providing meaningful incremental protection to the Agent, since there will be no material cash flows to capture. The springing mechanism ensures that the hard lockbox is in place before any significant revenue is generated, providing full protection during the period when cash management is most critical.
B. Cash Sweep DSCR Trigger
Section 11(b) of the Term Sheet provides that a cash sweep will be triggered when the trailing-twelve-month combined DSCR falls below 1.10x. MTDC proposes the following modifications to this trigger:
(i) Reduced DSCR Sweep Trigger During Lease-Up. For the first eighteen (18) months following the issuance of the first TCO (projected March 15, 2028, through September 15, 2029), the DSCR sweep trigger should be reduced from 1.10x to 1.05x on a combined basis. This reduced trigger level during the initial lease-up period reflects the reality that net operating income will be increasing as new leases commence and tenants take occupancy, and a 1.10x combined DSCR may not be achievable during the earliest months of operation even under a base-case leasing scenario. Following the expiration of the eighteen (18)-month lease-up period, the DSCR sweep trigger would revert to 1.10x on a combined basis.
(ii) Testing Methodology. DSCR for cash sweep purposes should be tested on a quarterly basis (rather than monthly, which introduces unnecessary volatility into the testing regime) using a trailing-twelve-month period. If twelve (12) months of operating history are not yet available as of a given test date (which will be the case during the early quarters following first TCO), the DSCR should be calculated using an annualized figure based on the most recent available quarter or quarters of operating history. This is consistent with standard practice for transitional assets and newly completed projects and avoids the distortion that would result from using a short-period sample with seasonal or one-time variations.
(iii) Cash Sweep Cure Right. MTDC proposes the addition of a cure right permitting MTDC (as guarantor) or Borrower to deposit cash or deliver an irrevocable standby letter of credit into a lender-controlled sweep cure reserve account in an amount calculated by Agent as sufficient to achieve a pro forma combined DSCR of not less than 1.10x (or 1.05x during the lease-up period, as applicable). Upon the deposit of such amount (the "Sweep Cure Deposit"), the cash sweep would cease and excess cash flows would be distributed in accordance with the cash management waterfall described below. The Sweep Cure Deposit would be released to Borrower upon achievement of a trailing-twelve-month combined DSCR at or above the applicable sweep trigger level for two (2) consecutive calendar quarters. MTDC proposes that the Borrower be permitted to exercise this cure right on not more than two (2) occasions during the term of the Senior Mortgage Loan (excluding any extension periods, during which additional cure exercises would be available).
C. Cash Sweep EOD Trigger
Section 11(c) of the Term Sheet provides that a cash sweep will be triggered upon the occurrence and during the continuance of an Event of Default. MTDC does not object to this trigger, which is standard and appropriate. However, MTDC requests that the Term Sheet expressly provide that a cash sweep triggered by an Event of Default shall automatically terminate upon the satisfaction of each of the following conditions:
(i) the Event of Default giving rise to the cash sweep has been cured in full (to the extent such Event of Default is curable under the terms of the Loan Agreement);
(ii) no other Event of Default exists; and
(iii) Borrower has maintained compliance with all financial covenants set forth in the Loan Agreement (including the DSCR covenant, the LTV covenant, and any debt yield covenant) for two (2) consecutive calendar quarters following the date on which the Event of Default was cured.
This automatic termination mechanism ensures that a cured default does not permanently impair Borrower's cash flow rights and provides an appropriate transition period during which Agent can confirm that the Project is performing satisfactorily before cash flows are released.
D. Excess Cash Flow Waterfall
Section 11(d) of the Term Sheet references a cash management waterfall but does not specify the order of priority in which funds in the cash management account will be applied. MTDC requests that the definitive loan documents include a detailed waterfall provision substantially as follows:
(i) First: Payment of current monthly debt service on the Senior Mortgage Loan (interest and, if applicable, principal amortization);
(ii) Second: Funding of all required reserves, including the interest reserve, tax and insurance escrow, TI/LC reserve, CapEx reserve, and any other reserves required under the Loan Agreement;
(iii) Third: Payment of approved operating expenses and capital expenditures for the Project, in accordance with the approved annual operating budget;
(iv) Fourth: Payment of ground rent to New York City Economic Development Corporation ("NYCEDC") in the amount of $4,200,000 per annum (with CPI escalation every five (5) years), as required under the ground lease recorded with the New York City Register as CRFN 2020000198762 (the "Ground Lease");
(v) Fifth: Payment of current monthly debt service on the mezzanine loan from Granite Peak Capital Partners, LP, subject to the terms and conditions of the Intercreditor Agreement to be negotiated among Ironclad, Granite Peak, and the respective borrowers; and
(vi) Sixth: Distribution of all remaining excess cash flow to Borrower.
MTDC proposes that during a Cash Sweep Period (defined as any period during which a cash sweep is in effect as a result of a DSCR Trigger Event or an Event of Default Trigger Event), items (v) and (vi) above shall be swept into a lender-controlled reserve account in lieu of being distributed to Granite Peak or Borrower, as applicable. However, items (i) through (iv) shall continue to be released and applied in accordance with the waterfall at all times, including during a Cash Sweep Period, to ensure that senior debt service, required reserves, essential operating expenses, and ground rent obligations continue to be satisfied. The failure to pay ground rent, in particular, could give rise to a default under the Ground Lease and jeopardize the Borrower's leasehold interest in the Project, which would be adverse to the interests of all parties, including the Agent and the lending syndicate.
IV. Reserve Requirements (Term Sheet § 12)
MTDC recognizes that the reserve structure is a critical component of the credit facility and that Ironclad's reserve requirements reflect a conservative and prudent approach to construction lending. MTDC's comments on the reserve provisions set forth in Section 12 of the Term Sheet are intended to tailor the reserves to the specific characteristics and timeline of the Project, while maintaining appropriate protections for the Agent and the lending syndicate.
A. Interest Reserve
Section 12(a) of the Term Sheet requires a pre-funded interest reserve equal to twelve (12) months of projected debt service, to be fully funded at closing. Based on the pricing terms of the Senior Mortgage Loan (Term SOFR plus 425 basis points, with a SOFR Floor of 1.00%, resulting in an all-in interest rate of 5.25% at the Floor), twelve (12) months of projected interest on the full $475,000,000 commitment amount would be approximately $24,937,500 (subject to adjustment based on the actual drawn balance at any given time and prevailing SOFR rates).
MTDC proposes the following modification:
The pre-funded interest reserve at closing should be reduced to nine (9) months of projected interest (approximately $18,703,125 at the Floor rate on the full commitment amount), with the remaining three (3) months to be funded from operating income generated by the Project or, if necessary, from additional equity contributions by MTDC, as and when needed during the construction period. To provide additional comfort to the Agent, Borrower shall be required to replenish the interest reserve to twelve (12) months of projected interest in the event the reserve balance falls below six (6) months of projected interest at any quarterly test date. Such replenishment shall be made within thirty (30) days following Agent's written notice to Borrower that the minimum threshold has been breached.
This approach reduces the upfront equity requirement by approximately $6.2 million while preserving the Agent's downside protection through the replenishment mechanism. MTDC notes that its $200,000,000 equity commitment to the Project—which represents approximately 29.6% of total project costs—provides substantial additional cushion and demonstrates MTDC's alignment of interest with the lending syndicate.
B. Real Estate Tax and Insurance Escrow
MTDC does not object to the requirement set forth in Section 12(b) of the Term Sheet for monthly escrow deposits for real estate taxes and insurance premiums. MTDC requests, however, the following clarifications and modifications:
(i) RESPA Compliance. The escrow shall be administered in accordance with the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., and the regulations promulgated thereunder, to the extent applicable to the Senior Mortgage Loan. Ironclad shall remit escrow payments to the applicable taxing authority (the New York City Department of Finance) and to the applicable insurance carrier(s) on a timely basis, and shall provide Borrower with an annual escrow analysis statement as required by applicable law.
(ii) Waiver Upon Performance. MTDC proposes that the tax and insurance escrow requirement be waived upon Borrower's achievement of a combined DSCR of not less than 1.25x for two (2) consecutive calendar quarters, provided that Borrower provides Agent with evidence reasonably satisfactory to Agent that Borrower is paying real estate taxes and insurance premiums directly to the applicable payee on a timely basis. The waiver would continue so long as the combined DSCR remains at or above 1.25x and Borrower continues to provide evidence of timely direct payment. If the combined DSCR falls below 1.25x for any calendar quarter, the escrow requirement would be reinstated effective as of the first day of the next calendar quarter following Agent's written notice to Borrower.
C. Tenant Improvement / Leasing Commission Reserve
Section 12(c) of the Term Sheet requires a TI/LC reserve of $35.00 per rentable square foot ("RSF"), to be fully funded at closing. Based on the Project's approximately 1,200,000 RSF of leasable space across the office, retail, and residential components, a fully funded TI/LC reserve at $35.00/RSF would total approximately $42,000,000 at closing.
MTDC proposes a phased funding approach:
(i) Initial Funded Amount at Closing: $20.00 per RSF, totaling approximately $24,000,000. This initial funding level provides a substantial reserve for early leasing activity, including the execution of anchor tenant leases that MTDC expects to conclude prior to or shortly after substantial completion.
(ii) Monthly Deposits Following First TCO: Commencing upon the issuance of the first TCO (projected March 15, 2028), Borrower shall make monthly deposits into the TI/LC reserve in the amount of $1.25 per RSF (approximately $1,500,000 per month), until the aggregate amount in the TI/LC reserve (including the initial funded amount and all monthly deposits) reaches the target level of $35.00 per RSF. Based on this schedule, the reserve would reach the $35.00/RSF target within approximately twelve (12) months following first TCO.
The rationale for this phased approach is that pre-funding the full $42,000,000 at closing is unnecessary given that leasing activity—and the corresponding demand for tenant improvement allowances and leasing commissions—will not meaningfully commence until after substantial completion of the Project. Requiring the full TI/LC reserve at closing increases the upfront equity requirement without providing incremental protection during the construction period, when the reserve funds would be sitting idle in a lender-controlled account. The phased approach aligns the reserve build-up with the actual leasing timeline while ensuring that the full target reserve is in place before the peak leasing period.
D. Capital Expenditure Reserve
Section 12(d) of the Term Sheet requires a capital expenditure ("CapEx") reserve of $0.50 per RSF per annum, funded through monthly deposits commencing at closing. MTDC proposes the following modification:
The CapEx reserve obligation should not commence until the earlier of (i) twenty-four (24) months after the issuance of the first TCO (projected September 15, 2030, based on a first TCO date of March 15, 2028) or (ii) the date on which the Project achieves seventy-five percent (75%) economic occupancy (calculated based on leases executed and in occupancy or with rent commencement dates within sixty (60) days).
The Project will be new construction, and upon completion, all building systems, structural components, and tenant improvements will be subject to comprehensive manufacturer's warranties and the general contractor's warranty obligations under the $412,000,000 guaranteed maximum price ("GMP") contract with Cobalt Construction Group, Inc. (Contract No. CCG-HYW-2025-001). During the initial years of operation, capital expenditure needs are expected to be minimal, as any defects or deficiencies will be covered under the applicable warranty programs. Requiring CapEx reserve deposits from the Closing Date—before construction has even been completed—imposes an unnecessary cash burden on the Project with no corresponding benefit to the Agent.
E. Completion / Performance Reserve
Section 12(e) of the Term Sheet requires a completion guaranty reserve equal to ten percent (10%) of the remaining construction budget at each quarterly test date. This reserve is designed to ensure that sufficient funds are available to complete construction of the Project in the event of a cost overrun or contractor default.
MTDC proposes the following alternative approaches:
Primary Proposal: Reduce the completion reserve requirement from 10% of the remaining total construction budget to 5% of the remaining hard-cost budget only, excluding soft costs (architectural, engineering, legal, and other professional fees), financing costs (loan interest, fees, and closing costs), and contingency amounts. The hard-cost budget is the component of the construction budget most directly related to the physical completion of the Project and is the appropriate reference point for a completion reserve. Soft costs and financing costs are ongoing obligations that will be incurred regardless of the status of construction, and the contingency is itself a form of reserve. Including these categories in the completion reserve base results in a reserve that is disproportionate to the actual risk of non-completion. MTDC notes that its $200,000,000 equity commitment, the $412,000,000 GMP contract with Cobalt Construction Group (which includes a contractor performance bond), and the 5% contingency already included in the construction budget collectively provide substantial protection against completion risk.
Alternative Proposal: In lieu of a cash reserve, MTDC proposes to deliver a completion guaranty from MTDC, in form and substance reasonably acceptable to Agent, guaranteeing the lien-free completion of the Project in accordance with the approved plans and specifications and the approved construction budget. MTDC's net assets of approximately $3,700,000,000 (per the audited financial statements prepared by Whitfield Albrecht & Co. LLP for the fiscal year ended December 31, 2024) and its Pinnacle Ratings Group long-term issuer rating of A– (identifier PRG-MTDC-A-2024-1187) provide strong credit support for a completion guaranty of this nature. The completion guaranty would terminate upon the achievement of substantial completion, issuance of the TCO, and satisfaction of the other completion conditions to be specified in the Loan Agreement.
F. Ground Lease Reserve
To the extent Ironclad requires a ground lease reserve to protect against the risk of a default under the Ground Lease, MTDC proposes the following:
(i) The ground lease reserve should be limited to six (6) months of ground rent, equal to $2,100,000 (based on current annual ground rent of $4,200,000 payable to NYCEDC under the Ground Lease).
(ii) Borrower should be permitted to satisfy the ground lease reserve requirement by delivering an irrevocable standby letter of credit from a qualified financial institution (with a long-term unsecured debt rating of at least A– from Pinnacle Ratings Group or equivalent) in the amount of $2,100,000, in lieu of a cash deposit. The letter of credit would be drawable by Agent upon written notice that Borrower has failed to make any ground rent payment within the applicable grace period under the Ground Lease.
A six-month reserve provides Agent with ample time to step in and cure any ground rent default, preserving the Borrower's leasehold interest, while avoiding the need to tie up cash that could be more productively deployed in the construction and leasing of the Project. The letter of credit option provides additional flexibility to the Borrower without diminishing the Agent's protection.
V. Additional Observations
In addition to the foregoing comments on Sections 5, 9, 11, and 12 of the Term Sheet, MTDC wishes to flag the following items, which it intends to address in the negotiation of the definitive loan documents but does not propose to resolve at the term sheet stage:
•  Intercreditor Agreement. The terms of the Intercreditor Agreement between Ironclad (as Agent for the senior lending syndicate) and Granite Peak Capital Partners, LP (as mezzanine lender) will need to be negotiated and agreed upon as a condition to closing. MTDC understands that Granite Peak's mezzanine term sheet, dated March 7, 2025, has been delivered to Ironclad for review. Coordination among Clearfield & Associates LLP (as senior lender's counsel), VanRhein Bloch LLP (as mezzanine lender's counsel), and Calderwood & Harkness LLP (as borrower's counsel) will be required to negotiate and finalize the Intercreditor Agreement, and MTDC proposes that the parties schedule an initial intercreditor call during the week of March 10, 2025.
•  Permitted Transfers. The definition and scope of Permitted Transfers will need to be addressed in the definitive Loan Agreement. MTDC expects to request that Permitted Transfers include, among others, transfers among MTDC affiliates, admissions of additional equity participants holding minority interests, estate planning transfers, and transfers of non-controlling interests, in each case subject to customary conditions including Agent notice, maintenance of SPE status, and compliance with "know your customer" and anti-money laundering requirements.
•  Construction Draw Procedures. The definitive Loan Agreement will need to include detailed provisions governing construction draw requests, including the role and authority of the independent engineer (to be retained by Agent at Borrower's expense), approval thresholds for change orders, retainage requirements, and conditions to each disbursement. MTDC requests that the parties discuss these provisions early in the documentation process to ensure alignment with the construction schedule and the terms of the GMP contract with Cobalt Construction Group.
•  Prepayment Terms. MTDC notes that the Term Sheet provides for a 0.25% exit fee on prepayment of the Senior Mortgage Loan. MTDC intends to negotiate the terms and conditions of prepayment, including any applicable prepayment lockout periods, yield maintenance or defeasance requirements, and the circumstances under which the exit fee may be reduced or waived (e.g., in connection with a refinancing with Ironclad or a member of the lending syndicate).
•  Insurance Requirements. The Term Sheet references insurance requirements that will be specified in the definitive Loan Agreement. MTDC notes that builder's risk coverage in the amount of $500,000,000 (full replacement cost) has been bound with Fortis Indemnity Corp., brokered by Castleton Risk Advisors, LLC, and that operational coverages (including commercial general liability, property, business interruption, and umbrella/excess policies) will be procured in connection with the transition from construction to operations. MTDC requests that the insurance requirements in the Loan Agreement be consistent with the coverages available in the current market and with the standards customarily required for Class A mixed-use developments in Manhattan.
MTDC's outside auditors (Whitfield Albrecht & Co. LLP) and tax counsel (Sylvia Hartwell of Calderwood & Harkness LLP) are available to address any questions that Ironclad or its counsel may have regarding MTDC's financial statements, tax structure, or organizational documents.
We appreciate Ironclad's willingness to engage constructively in the negotiation of the Term Sheet and the definitive loan documents, and we are confident that the comments set forth in this letter can be resolved in a manner that is satisfactory to all parties. MTDC remains firmly committed to the objective of closing the Senior Mortgage Loan on or before the target closing date of June 15, 2025, and is prepared to dedicate the resources necessary to achieve that timeline.
We propose a telephone call or in-person meeting during the week of March 3, 2025, to discuss the comments set forth in this letter and to establish a schedule for the preparation and negotiation of the definitive loan documents. We would ask that Ironclad share its response to these comments with both Calderwood & Harkness LLP and MTDC's in-house legal team, including Lydia Okafor, General Counsel of MTDC, who will be actively involved in the documentation process.
A redlined copy of the Term Sheet reflecting the proposed revisions described in this letter is enclosed for your reference and review.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Fairchild, Partner Real Estate Department One Liberty Plaza, 55th Floor New York, New York 10006 Direct: (212) 455-7148
Email: dfairchild@calderwoodharkness.com
cc: Harrison Whitmore, Esq., Clearfield & Associates LLP (via email) David Harrington, Metropolitan Transit Development Corp. (via email) Lydia Okafor, Metropolitan Transit Development Corp. (via email) Marcus Jennings, Metropolitan Transit Development Corp. (via email) Priya Subramanian, Metropolitan Transit Development Corp. (via email)
Enclosure: Redline of Senior Mortgage Loan Term Sheet dated February 28, 2025, reflecting MTDC's proposed revisions

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

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