CONSTRUCTION DISBURSEMENT AGREEMENT
by and among
HUDSON YARDS WEST MORTGAGE LLC, a Delaware limited liability company, as Borrower,
IRONCLAD NATIONAL BANK, N.A., a national banking association, as Administrative Agent,
and
THE LENDERS PARTY HERETO
Property: 450 West 34th Street, New York, New York 10001 (Block 729, Lots 1, 5, 12, 15, Borough of Manhattan)
Dated as of June 15, 2025
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THIS CONSTRUCTION DISBURSEMENT AGREEMENT (this "Agreement") is made and entered into as of June 15, 2025 (the "Effective Date"), by and among:
HUDSON YARDS WEST MORTGAGE LLC, a Delaware limited liability company (the "Borrower"), having an address c/o Metropolitan Transit Development Corp., 200 South Michigan Avenue, Suite 3100, Chicago, Illinois 60604;
IRONCLAD NATIONAL BANK, N.A., a national banking association, in its capacity as administrative agent for the Lenders (together with its successors and assigns in such capacity, the "Agent"), having an address at 277 Park Avenue, New York, New York 10172; and
THE LENDERS from time to time party to the Loan Agreement referred to below (collectively, the "Lenders").
RECITALS
WHEREAS, Borrower, Agent, and the Lenders have entered into that certain Loan Agreement of even date herewith (as the same may be amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), pursuant to which the Lenders have agreed to make a senior mortgage loan to Borrower in the aggregate principal amount of Four Hundred Seventy-Five Million and No/100 Dollars ($475,000,000.00) (the "Loan"), subject to the terms and conditions set forth therein;
WHEREAS, Borrower is the owner of the leasehold interest in the real property commonly known as 450 West 34th Street, New York, New York 10001 (Block 729, Lots 1, 5, 12, and 15, Borough of Manhattan, City, County, and State of New York) (the "Project Site"), pursuant to that certain ground lease dated June 1, 2020, recorded at City Register File Number (CRFN) 2020000198762, New York City Automated City Register Information System (NYC ACRIS), Office of the City Register, New York County (the "Ground Lease"), originally between New York City Economic Development Corporation ("NYCEDC"), as ground lessor, and Metropolitan Transit Development Corp. ("MTDC"), as ground lessee, which Ground Lease was duly assigned to Borrower pursuant to that certain Assignment and Assumption of Ground Lease recorded at CRFN 2024000312458, NYC ACRIS;
WHEREAS, Borrower intends to construct on the Project Site a mixed-use development consisting of approximately 1,250,000 gross square feet of office, retail, and ancillary space, together with related infrastructure, amenities, and improvements (as more particularly described in the Approved Plans, the "Project"), with total anticipated project costs of Nine Hundred Twenty Million and No/100 Dollars ($920,000,000.00);
WHEREAS, Borrower has entered into that certain Guaranteed Maximum Price Construction Contract dated as of May 1, 2025, bearing Contract No. CCG-HYW-2025-001, with Cobalt Construction Group, Inc., a New York corporation (the "General Contractor"), establishing a guaranteed maximum price of Four Hundred Twelve Million and No/100 Dollars ($412,000,000.00) for the construction of the Project (as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms of this Agreement, the "GMP Contract");
WHEREAS, as a condition precedent to the making of the Loan and the initial Advance (as hereinafter defined), the parties hereto desire to set forth the terms, conditions, and procedures governing the disbursement of Loan proceeds for the construction of the Project, the submission and approval of Draw Requests, the maintenance of the Approved Budget, and related matters; and
WHEREAS, capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 — DEFINITIONS
Section 1.1. Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
"Advance" means each disbursement of Loan proceeds made by Agent to or for the benefit of Borrower pursuant to the terms and conditions of this Agreement and the Loan Agreement.
"Approved Budget" means the detailed construction budget attached hereto as Exhibit A, containing hard-cost and soft-cost line items totaling Nine Hundred Twenty Million and No/100 Dollars ($920,000,000.00), as the same may be modified from time to time in accordance with Section 5.1 of this Agreement. The Approved Budget shall set forth, for each line item, the budgeted amount, amounts funded to date, the current Draw Request amount, total amounts funded (including the current Draw Request), and the remaining balance for such line item.
"Approved Plans" means the final plans and specifications for the Project, including all architectural, structural, mechanical, electrical, plumbing, fire protection, and civil engineering drawings, prepared by the project architect and approved by Agent and the Construction Consultant in writing prior to the initial Advance, as the same may be modified from time to time by approved Change Orders in accordance with Section 5.2 of this Agreement.
"Balancing Test" means the test described in Section 3.5 of this Agreement.
"Change Order" means any modification, amendment, supplement, or change to the GMP Contract, the Approved Plans, the scope of the Work, the construction schedule, or the Approved Budget, whether by written change order, construction change directive, or other instrument, however denominated.
"Construction Commencement Date" means June 15, 2025.
"Construction Consultant" means, initially, such qualified independent construction consulting firm as Agent shall engage pursuant to Section 2.4 of this Agreement, at Borrower's expense, to review Draw Requests, inspect the Work, and advise Agent on construction progress, quality, and budget compliance, and any successor construction consulting firm appointed by Agent from time to time.
"Contingency" means, collectively, the hard-cost contingency line item and the soft-cost contingency line item set forth in the Approved Budget, in the amounts initially reflected therein, as the same may be adjusted from time to time in accordance with Article 5 of this Agreement.
"Cost Certification" means the certification described in Section 4.3(g) of this Agreement.
"Draw Period" means each calendar month during the term of this Agreement; provided, that the first Draw Period shall be the partial calendar month commencing on the Effective Date and ending on June 30, 2025, and the last Draw Period shall be the partial calendar month in which the final Advance is made.
"Draw Request" means a written request for an Advance submitted by Borrower to Agent in the form of Exhibit B attached hereto, together with all supporting documentation required by Section 4.3 of this Agreement.
"Equity Funds" means, collectively, (a) the equity contribution of Two Hundred Million and No/100 Dollars ($200,000,000.00) from MTDC (or its Affiliates, as applicable), and (b) the transit infrastructure grant in the amount of Forty-Five Million and No/100 Dollars ($45,000,000.00) awarded by the City of New York, acting through the New York City Economic Development Corporation (the "NYC Transit Infrastructure Grant"), in each case as deposited into the Project Account or otherwise applied to Project costs in a manner satisfactory to Agent.
"Final Completion" means the date on which the Construction Consultant certifies in writing to Agent that (a) all punch-list work identified in connection with Substantial Completion has been completed in accordance with the Approved Plans, (b) all Work has been completed in all material respects in accordance with the Approved Plans, the GMP Contract, and all applicable laws, codes, and governmental requirements, and (c) final lien waivers, as-built surveys, and all other deliverables required by Section 4.6 of this Agreement have been delivered.
"GMP" means Four Hundred Twelve Million and No/100 Dollars ($412,000,000.00), as such amount may be modified from time to time by approved Change Orders executed in accordance with Section 5.2 of this Agreement.
"GMP Contract" means that certain Guaranteed Maximum Price Construction Contract dated as of May 1, 2025, bearing Contract No. CCG-HYW-2025-001, between Borrower and Cobalt Construction Group, Inc., as the same may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the terms of this Agreement.
"In-Balance" has the meaning set forth in Section 3.5(a) of this Agreement.
"Lien Waiver" means the conditional and unconditional lien waivers described in Section 4.3(e) of this Agreement, substantially in the form of Exhibit C attached hereto, conforming to the requirements of New York Lien Law Sections 34 and 38.
"Out-of-Balance Amount" has the meaning set forth in Section 3.5(b) of this Agreement.
"Project Account" means the segregated deposit account established and maintained by Borrower at Ironclad National Bank, N.A. (ABA Routing Number: 021-003-178), into which all Loan disbursements shall be deposited and from which all payments for Project costs shall be made.
"Projected Substantial Completion Date" means December 15, 2027, as such date may be extended by approved Change Orders or by force majeure events in accordance with the terms of this Agreement and the Loan Agreement, but in no event by more than one hundred eighty (180) days beyond such date.
"Retainage" means the holdback of a portion of each Advance allocable to hard costs as described in Section 3.3 of this Agreement.
"Stored Materials" means materials, equipment, and supplies intended for incorporation into the Work that are stored on the Project Site or at an approved off-site storage location in accordance with Section 3.4 of this Agreement.
"Substantial Completion" means the date on which all of the following conditions have been satisfied: (a) a temporary certificate of occupancy ("TCO") has been issued by the New York City Department of Buildings for the Project (or such portion thereof as Agent shall approve), (b) the Work has been completed in all material respects in accordance with the Approved Plans (subject only to minor punch-list items that do not materially affect the use, occupancy, or safety of the Project), and (c) the Construction Consultant has certified in writing to Agent that Substantial Completion has occurred. The projected date for Substantial Completion is December 15, 2027, with the first TCO projected for March 15, 2028.
"Title Endorsement" means the date-down endorsement to the mortgagee title insurance policy described in Section 4.3(d) of this Agreement.
"Work" means all labor, materials, equipment, services, and other items required to construct the Project in accordance with the Approved Plans and the GMP Contract, including all work to be performed by the General Contractor, its subcontractors, sub-subcontractors, materialmen, and suppliers.
Section 1.2. Rules of Construction. Unless the context otherwise requires: (a) words importing the singular include the plural, and vice versa; (b) references to "Sections," "Articles," and "Exhibits" are to sections, articles, and exhibits of this Agreement; (c) the terms "herein," "hereof," "hereunder," and similar terms refer to this Agreement as a whole, and not to any particular provision hereof; (d) the term "including" means "including, without limitation"; (e) the term "Business Day" has the meaning set forth in the Loan Agreement; and (f) references to any document include all amendments, restatements, supplements, and modifications thereto.
ARTICLE 2 — CONSTRUCTION OBLIGATIONS; CONSULTANT
Section 2.1 — Obligation to Construct
(a) Borrower shall cause the Project to be constructed diligently and continuously, in a good and workmanlike manner, free and clear of all mechanic's liens and other encumbrances (except as expressly permitted hereunder or under the Loan Agreement), in material compliance with (i) the Approved Plans, (ii) the Approved Budget, (iii) the GMP Contract, (iv) all applicable federal, state, and local laws, statutes, ordinances, codes, rules, and regulations (including, without limitation, the New York City Building Code, the New York City Zoning Resolution, and all applicable environmental laws), (v) all governmental permits and approvals (including, without limitation, the ULURP approvals described in Section 6.1(h)), (vi) the Ground Lease, and (vii) all requirements of the Loan Documents.
(b) Borrower shall cause construction of the Project to commence on or before the Construction Commencement Date. Borrower shall prosecute and cause the General Contractor to prosecute the Work continuously and diligently so as to achieve Substantial Completion on or before December 15, 2027, and to obtain the first TCO on or before March 15, 2028. Borrower shall cause all punch-list work to be completed and Final Completion to be achieved within ninety (90) days following the date of Substantial Completion. The foregoing milestone dates shall be subject to extension only as expressly provided in this Agreement.
(c) Borrower shall be solely responsible for the means, methods, techniques, sequences, and procedures of construction and for safety precautions and programs in connection with the Work. Neither Agent, the Lenders, nor the Construction Consultant shall have any obligation to supervise, direct, or control the Work, and no approval, inspection, or review by any of the foregoing shall relieve Borrower of its obligations hereunder.
Section 2.2 — General Contractor
(a) All Work shall be performed by Cobalt Construction Group, Inc., a New York corporation, whose principal office is located at 330 West 42nd Street, 9th Floor, New York, New York 10036 (Contact: Frank DelVecchio, Chief Executive Officer; Hiroshi Tanaka, Project Executive; Gail Merriman, Chief Financial Officer), under and in accordance with the GMP Contract. The General Contractor shall be responsible for the day-to-day management, coordination, and supervision of all construction activities at the Project Site.
(b) Borrower shall not, without the prior written consent of Agent (which consent may be withheld in Agent's sole and absolute discretion): (i) replace or terminate the General Contractor (except for cause, as defined in the GMP Contract, in which event Borrower shall promptly notify Agent and engage a replacement contractor acceptable to Agent); (ii) materially amend, modify, supplement, or waive any provision of the GMP Contract; or (iii) consent to or permit any assignment or delegation by the General Contractor of its obligations under the GMP Contract. Any such action taken without Agent's prior written consent shall constitute an Event of Default hereunder.
(c) Borrower shall enforce all of its rights under the GMP Contract and shall cause the General Contractor to comply with all of its obligations thereunder, including, without limitation, the General Contractor's obligations with respect to payment and performance bonds, insurance, subcontracting, change orders, scheduling, and warranties.
Section 2.3 — Property Manager
Borrower has designated Evergreen Property Management LLC, a New York limited liability company (Contact: Teresa Langford, Principal), having an address at 601 West 26th Street, Suite 410, New York, New York 10001, to serve as property manager for the Project upon Substantial Completion. Borrower shall not replace the property manager or materially amend the terms of the property management agreement without the prior written consent of Agent, which consent shall not be unreasonably withheld, conditioned, or delayed. Borrower shall deliver to Agent a fully executed copy of the property management agreement no later than sixty (60) days prior to the projected date of Substantial Completion.
Section 2.4 — Construction Consultant
(a) Agent shall engage, at Borrower's expense, a qualified independent construction consulting firm (the "Construction Consultant") to perform the following services: (i) review and analyze each Draw Request and supporting documentation submitted by Borrower; (ii) conduct periodic inspections of the Project Site and the Work, including at least one on-site inspection during each Draw Period for which a Draw Request is submitted; (iii) review the Approved Plans, the construction schedule, and all Change Orders; (iv) monitor construction progress, quality, and budget compliance; (v) perform the Balancing Test in conjunction with Agent; (vi) advise Agent regarding the accuracy of percentage-of-completion claims, the adequacy of Retainage, and the reasonableness of cost-to-complete estimates; and (vii) provide such other construction advisory services as Agent may reasonably request from time to time.
(b) The Construction Consultant shall have access to the Project Site at all reasonable times upon reasonable prior notice (which notice shall not be less than one (1) Business Day, except in the case of emergency, in which case no prior notice shall be required). Borrower shall, and shall cause the General Contractor and all subcontractors to, cooperate fully with the Construction Consultant, provide access to all areas of the Project Site, and furnish such information, documents, and records as the Construction Consultant may reasonably request in connection with the performance of its duties.
(c) The recommendations, reports, and approvals of the Construction Consultant shall be advisory in nature and shall not be binding on Agent. Agent retains independent authority to approve or disapprove any Draw Request, Change Order, or other matter submitted for Agent's approval hereunder, regardless of the Construction Consultant's recommendation. The engagement of the Construction Consultant shall not relieve Borrower of any of its obligations under this Agreement or any other Loan Document.
(d) All fees, costs, and expenses of the Construction Consultant shall be borne by Borrower, shall be included as a soft-cost line item in the Approved Budget, and shall be payable by Borrower within thirty (30) days following receipt of invoice. If Borrower fails to pay such fees, costs, and expenses when due, Agent may, in its discretion, fund such amounts from Loan proceeds and deduct the same from future Advances.
Section 2.5 — Approved Plans
(a) On or prior to the date of the initial Advance, Borrower shall deliver to Agent and the Construction Consultant, for their review and approval, complete and final plans and specifications for the Project, including all architectural, structural, mechanical, electrical, plumbing, fire protection, civil engineering, and landscape drawings, specifications, and related documents (collectively, the "Approved Plans"). The Approved Plans shall be of sufficient detail and completeness to enable the General Contractor to construct the Project in accordance therewith and to enable the Construction Consultant to monitor construction progress and verify percentage-of-completion claims.
(b) Agent and the Construction Consultant shall review the Approved Plans and shall notify Borrower in writing of any objections or required modifications within fifteen (15) Business Days following receipt thereof. Borrower shall promptly address any such objections or modifications to Agent's reasonable satisfaction. No initial Advance shall be made until the Approved Plans have been approved in writing by Agent and the Construction Consultant.
(c) Following approval, any changes or modifications to the Approved Plans shall be made only in accordance with the Change Order procedures set forth in Section 5.2 of this Agreement.
ARTICLE 3 — FUNDING MECHANICS
Section 3.1 — Sources and Uses; Priority of Disbursement
(a) The total sources of funds for the Project shall be as follows:
(b) The total uses of funds for the Project shall equal the total sources of funds, as set forth in detail in the Approved Budget attached hereto as Exhibit A.
(c) Equity-First Requirement. As a condition precedent to the initial Advance and to each subsequent Advance, Borrower shall have contributed, and shall provide evidence satisfactory to Agent (including, without limitation, deposit confirmations, wire transfer receipts, and account statements) that Borrower has contributed, one hundred percent (100%) of the Equity Funds (i.e., the full amount of Two Hundred Forty-Five Million and No/100 Dollars ($245,000,000.00), consisting of (i) the MTDC equity contribution of $200,000,000 and (ii) the NYC Transit Infrastructure Grant of $45,000,000) to the Project Account or has otherwise applied such Equity Funds to Project costs in a manner satisfactory to Agent. No Advance of Loan proceeds shall be made until Agent has confirmed, to its satisfaction, that all Equity Funds have been irrevocably committed and deposited.
(d) Priority of Disbursement. Following the full contribution of Equity Funds as provided in Section 3.1(c) above, Loan proceeds shall be disbursed pari passu with Mezzanine Loan proceeds in proportion to their respective commitment amounts (i.e., approximately 70.37% from the Senior Mortgage Loan and 29.63% from the Mezzanine Loan for each dollar disbursed), or on such other basis as may be provided in that certain Intercreditor Agreement dated as of even date herewith (the "Intercreditor Agreement") between Agent and Granite Peak Capital Partners, LP, as mezzanine lender (the "Mezz Lender"). In the event of any conflict between this Section 3.1(d) and the Intercreditor Agreement, the terms of the Intercreditor Agreement shall control.
Section 3.2 — Draw Periods and Advance Frequency
(a) Borrower may submit no more than one (1) Draw Request per Draw Period. Each Draw Request shall cover Work performed and costs incurred during the immediately preceding Draw Period (or such portion of a Draw Period as may apply in the case of the initial or final Draw Request).
(b) Each Draw Request shall be submitted to Agent no later than the fifteenth (15th) day of the calendar month following the Draw Period to which such Draw Request relates (e.g., a Draw Request for Work performed during the month of July must be submitted no later than August 15). Draw Requests submitted after such date may, at Agent's election, be deferred to the following Draw Period.
(c) Agent shall fund or deny (with a written explanation of the basis for such denial) each conforming Draw Request within fifteen (15) Business Days following receipt of a complete Draw Request with all required supporting documentation in conformity with the requirements of Article 4. If Agent requires additional information or documentation, the fifteen (15) Business Day period shall recommence upon receipt of the additional information or documentation.
(d) The minimum amount of any Advance shall be Five Hundred Thousand and No/100 Dollars ($500,000.00), unless such Advance is the final Advance hereunder.
Section 3.3 — Retainage
(a) Agent shall retain ten percent (10%) of each Advance allocable to hard costs (the "Retainage") until such time as the Construction Consultant certifies in writing to Agent that the Work is fifty percent (50%) complete (based on the percentage of the GMP that has been earned and certified through completed Work). The determination of fifty percent (50%) completion shall be based on the cumulative cost of Work in place as a percentage of the GMP, as verified by the Construction Consultant through on-site inspection and review of the General Contractor's applications for payment.
(b) Upon the Construction Consultant's certification that the Work is fifty percent (50%) complete, Retainage shall be reduced to five percent (5%) of subsequent hard-cost Advances. Retainage previously withheld at the ten percent (10%) rate shall not be retroactively reduced; only Advances made after such certification shall be subject to the reduced Retainage rate.
(c) Retainage shall be released upon Final Completion, subject to the delivery of all of the following to Agent: (i) final unconditional lien waivers from the General Contractor and all subcontractors, sub-subcontractors, and materialmen; (ii) a final date-down Title Endorsement confirming no mechanic's liens or other title exceptions not previously approved by Agent; (iii) a current as-built ALTA/NSPS survey of the Project Site; (iv) a temporary certificate of occupancy (TCO) or permanent certificate of occupancy (CO) issued by the New York City Department of Buildings for the Project; and (v) the Construction Consultant's written sign-off confirming Final Completion. Agent may, in its discretion, release Retainage applicable to individual subcontractors upon completion of their respective scopes of work, provided that final unconditional lien waivers and all other documentation reasonably required by Agent have been delivered with respect to such subcontractors.
Section 3.4 — Stored Materials
(a) Advances for Stored Materials shall be permitted only if all of the following conditions are satisfied:
(i) The Stored Materials are stored at the Project Site or at an off-site storage location that has been approved by Agent in writing (each, an "Approved Storage Location");
(ii) The Stored Materials are clearly identified, properly labeled, and physically segregated from materials belonging to other projects or third parties;
(iii) The Stored Materials are insured against loss, damage, and theft for their full replacement cost under the builder's risk insurance policy or a separate inland marine insurance policy naming Agent as loss payee;
(iv) Borrower has provided Agent with evidence satisfactory to Agent that Borrower has good and marketable title to the Stored Materials, free and clear of all liens, security interests, and other encumbrances (other than the liens granted under the Loan Documents);
(v) If the Stored Materials are stored at an Approved Storage Location other than the Project Site, Borrower has caused to be filed a UCC-1 financing statement with the appropriate filing office, naming Borrower as debtor and Agent as secured party, covering such Stored Materials, and has delivered to Agent a bailee letter or warehouseman's acknowledgment in form and substance satisfactory to Agent;
(vi) The aggregate outstanding amount of Advances for Stored Materials stored at Approved Storage Locations other than the Project Site shall not at any time exceed Ten Million and No/100 Dollars ($10,000,000.00); and
(vii) The Construction Consultant has inspected the Stored Materials and has confirmed in writing that such materials are consistent with the Approved Plans, are in good condition, and are properly stored and protected.
(b) Borrower shall deliver to Agent, with each Draw Request that includes a request for an Advance for Stored Materials, a detailed inventory listing of such materials, including a description, quantity, unit cost, total cost, storage location, and date of delivery, together with copies of invoices, bills of lading, and other evidence of purchase and delivery.
Section 3.5 — Balancing Test
(a) In-Balance. The Project shall be deemed "In-Balance" at any date of determination if and only if the sum of (i) undisbursed Loan proceeds committed under the Loan Agreement, plus (ii) undisbursed Equity Funds, plus (iii) undisbursed Mezzanine Loan proceeds committed under the Mezzanine Loan documents, plus (iv) the remaining Contingency, equals or exceeds the aggregate remaining cost to complete the Project in accordance with the Approved Budget, as determined by Agent (in consultation with the Construction Consultant) based on the most recent cost-to-complete estimate certified by the General Contractor and reviewed by the Construction Consultant.
(b) Out-of-Balance. If, at any date of determination, the Project is not In-Balance, the amount by which the aggregate remaining cost to complete the Project exceeds the sum of the items described in clauses (i) through (iv) of Section 3.5(a) shall be the "Out-of-Balance Amount." If the Project is Out-of-Balance, Borrower shall, within ten (10) Business Days following receipt of written notice from Agent specifying the Out-of-Balance Amount, deposit with Agent (or into the Project Account, as Agent may direct) the Out-of-Balance Amount in immediately available funds. Such deposit shall constitute additional Equity Funds and shall be disbursed for Project costs prior to any further Advance of Loan proceeds.
(c) Frequency of Balancing Test. Agent shall perform the Balancing Test in connection with the review of each Draw Request submitted by Borrower. In addition, Agent may perform the Balancing Test at any time upon the occurrence of any of the following: (i) a material Change Order (whether or not requiring Agent's consent); (ii) a casualty affecting the Project or the Project Site; (iii) a condemnation or threatened condemnation affecting the Project or the Project Site; (iv) a material delay in the construction schedule; (v) any event or circumstance that, in Agent's reasonable judgment, may cause the aggregate remaining cost to complete the Project to increase materially; or (vi) any Event of Default or event that, with the giving of notice or the passage of time (or both), would constitute an Event of Default.
Section 3.6 — Interest Reserve
(a) Agent may, in its discretion, fund Advances into a segregated interest reserve sub-account (the "Interest Reserve Account") maintained at Ironclad National Bank, N.A. for the purpose of paying monthly interest accruing on the outstanding principal balance of the Loan during the construction period. Interest on the Loan shall accrue at a per annum rate equal to Term SOFR (as defined in the Loan Agreement) plus four hundred twenty-five (425) basis points (4.25%), with a SOFR floor of one hundred (100) basis points (1.00%).
(b) The interest reserve is included as a soft-cost line item in the Approved Budget. Amounts on deposit in the Interest Reserve Account shall be applied by Agent to pay interest on the Loan on each interest payment date in accordance with the Loan Agreement. If at any time the amounts on deposit in the Interest Reserve Account are insufficient to pay interest due on the Loan, Borrower shall pay such deficiency from its own funds within five (5) Business Days following notice from Agent.
(c) Upon the occurrence of an Event of Default, Agent may apply amounts on deposit in the Interest Reserve Account to reduce the outstanding principal balance of the Loan or to cure any other default under the Loan Documents, in Agent's sole discretion.
ARTICLE 4 — DRAW REQUEST PROCEDURES
Section 4.1 — Submission of Draw Request
Each Draw Request shall be submitted to Agent at the following address:
Ironclad National Bank, N.A. 277 Park Avenue New York, New York 10172
Attention: Kenneth Pryor, Managing Director, Real Estate Finance
and Samantha Bledsoe, Vice President, Loan Originations
Email: kpryor@ironcladbank.com; sbledsoe@ironcladbank.com
with a copy (which shall not constitute notice) to Agent's counsel:
Clearfield & Associates LLP 399 Park Avenue, 28th Floor New York, New York 10022
Attention: Harrison Whitmore, Esq.
Email: hwhitmore@clearfieldlaw.com
Each Draw Request shall be accompanied by all supporting documentation described in Section 4.3 below. Incomplete Draw Requests may be returned to Borrower without action, and the fifteen (15) Business Day review period described in Section 3.2(c) shall not commence until a complete Draw Request has been received by Agent.
Section 4.2 — Form of Draw Request
(a) Each Draw Request shall be submitted in the form of Exhibit B attached hereto, utilizing AIA Document G702 (Application and Certificate for Payment) and AIA Document G703 (Continuation Sheet), or such other form as Agent may approve in writing from time to time. Each Draw Request shall be certified by an authorized officer of the General Contractor and by the project architect, and shall be countersigned by an authorized officer of Borrower.
(b) Each Draw Request shall contain the following detail, at a minimum:
(i) A line-item breakdown corresponding to the categories set forth in the Approved Budget;
(ii) The percentage of completion for each line item, as certified by the General Contractor and verified by the Construction Consultant;
(iii) The aggregate amount previously requested and funded for each line item;
(iv) The amount currently requested for each line item;
(v) The cumulative total funded (including the current request) for each line item;
(vi) The remaining balance for each line item;
(vii) The amount of Retainage withheld for each line item and in the aggregate;
(viii) A summary of the total Draw Request amount, broken down between hard costs and soft costs;
(ix) The Draw Request number, the applicable Draw Period, and the date of submission; and
(x) A reconciliation showing the sources and uses of funds to date and the remaining undisbursed amounts for each funding source.
Section 4.3 — Required Supporting Documentation
Each Draw Request shall be accompanied by the following supporting documentation:
(a) Borrower's Certification. An officer's certificate of Borrower, executed by an authorized officer of Hudson Yards West Mortgage LLC (or its sole member, Metropolitan Transit Development Corp.), substantially in the form of Exhibit D attached hereto, certifying as of the date of the Draw Request:
(i) No Event of Default exists under this Agreement, the Loan Agreement, or any other Loan Document, and no event has occurred that, with the giving of notice or the passage of time (or both), would constitute an Event of Default;
(ii) All representations and warranties of Borrower contained in this Agreement, the Loan Agreement, and the other Loan Documents remain true and correct in all material respects as of the date of the Draw Request (except to the extent that such representations and warranties expressly relate to an earlier date, in which case they remain true and correct in all material respects as of such earlier date);
(iii) All prior Advances have been applied solely for the purposes specified in the Approved Budget and in accordance with the terms of this Agreement;
(iv) The Work covered by the Draw Request has been completed in a good and workmanlike manner, in material compliance with the Approved Plans, all applicable laws, and the GMP Contract; and
(v) After giving effect to the requested Advance, the Project will be In-Balance.
(b) General Contractor's Certification. A certification by the General Contractor, executed by an authorized officer of Cobalt Construction Group, Inc. (or such other officer as may be authorized under the GMP Contract), certifying as of the date of the Draw Request:
(i) The Work covered by the Draw Request has been completed in accordance with the Approved Plans and the GMP Contract;
(ii) All subcontractors, sub-subcontractors, materialmen, and suppliers have been paid in full for all work performed and materials furnished prior to the current Draw Period (or are scheduled to be paid in full from the proceeds of the current Advance concurrently with the funding thereof);
(iii) There are no claims, disputes, stop-work orders, or proceedings pending or, to the General Contractor's knowledge, threatened with respect to the Project exceeding Five Hundred Thousand and No/100 Dollars ($500,000.00) individually or Two Million and No/100 Dollars ($2,000,000.00) in the aggregate; and
(iv) The GMP Contract is in full force and effect, and no default or event of default has occurred thereunder.
(c) Construction Consultant Report. A written report or approval of the Construction Consultant, addressed to Agent, confirming:
(i) The Work described in the Draw Request has been satisfactorily completed in accordance with the Approved Plans and the GMP Contract, based on the Construction Consultant's most recent on-site inspection;
(ii) The percentage of completion claimed for each line item is accurate and consistent with the Construction Consultant's observations;
(iii) The Project is on schedule to achieve Substantial Completion by the Projected Substantial Completion Date, or, if delays exist, identifying the nature and cause of such delays and the General Contractor's proposed remediation plan, including any proposed recovery schedule; and
(iv) Stored Materials, if any, included in the Draw Request have been inspected by the Construction Consultant and satisfy the requirements of Section 3.4.
(d) Title Endorsement. A date-down endorsement to the mortgagee title insurance policy (ALTA 2006 form; issued by Sentinel Title & Escrow Company; Commitment No. STN-2025-MH-04178; policy amount: $475,000,000.00), confirming:
(i) The continued first-priority lien of the Mortgage encumbering the Project Site (subject only to title exceptions previously approved by Agent);
(ii) No intervening liens, encumbrances, or other title exceptions have been recorded or are otherwise known to the title company since the effective date of the most recent Title Endorsement (or, in the case of the initial Advance, since the effective date of the mortgagee title insurance policy), including, without limitation, no mechanic's liens, judgment liens, tax liens, or lis pendens; and
(iii) The effective date of the mortgagee title insurance policy has been brought current through the date of the Draw Request (or such other date as Agent may require).
Each Title Endorsement shall be obtained from Sentinel Title & Escrow Company (Contact: Patricia Eng, Closing Officer), 140 Broadway, 20th Floor, New York, New York 10005, at Borrower's expense.
(e) Lien Waivers. The following Lien Waivers, conforming to the requirements of New York Lien Law Sections 34 and 38 and substantially in the form of Exhibit C attached hereto:
(i) Conditional Lien Waivers: Conditional lien waivers from the General Contractor and from each subcontractor, sub-subcontractor, and materialman whose work, labor, or materials are included in the current Draw Request, in an amount equal to the current Draw Request amount allocable to each such party, conditioned upon actual receipt of payment in the specified amount; and
(ii) Unconditional Lien Waivers: Unconditional lien waivers from the General Contractor and from each subcontractor, sub-subcontractor, and materialman whose work, labor, or materials were included in the immediately preceding Draw Request, in an amount equal to the prior Draw Request amount allocable to each such party, confirming actual receipt of payment and unconditionally waiving and releasing all lien rights for all work, labor, and materials furnished through the prior Draw Period.
(f) Evidence of Insurance. Evidence, in form and substance satisfactory to Agent, that all insurance required under Section 8.1 of this Agreement and the Loan Agreement remains in full force and effect, including, without limitation, builder's risk (all-risk, completed value form) coverage in an amount not less than Five Hundred Million and No/100 Dollars ($500,000,000.00) (replacement cost), issued by Fortis Indemnity Insurance Company (or such other insurer as Agent may approve), with Agent named as mortgagee and loss payee.
(g) Cost Certification. A cost breakdown and cost-to-complete estimate (the "Cost Certification"), certified by the General Contractor (executed by Gail Merriman, Chief Financial Officer of Cobalt Construction Group, Inc., or such other authorized officer) and reviewed by the Construction Consultant, setting forth:
(i) For each line item of the Approved Budget, the original budgeted amount, all approved Change Orders affecting such line item, the revised budget amount, costs incurred to date, the current period costs, and the estimated cost to complete;
(ii) Variance explanations for any line item for which actual or projected costs exceed the Approved Budget amount for such line item by more than five percent (5%); and
(iii) An analysis of the Contingency, showing the original Contingency amounts, draws on Contingency to date, remaining Contingency, and the Construction Consultant's assessment of the adequacy of remaining Contingency.
(h) Invoices and Backup. Copies of all invoices, receipts, executed subcontracts (for new subcontracts not previously delivered), purchase orders, and other documentation supporting the amounts requested in the Draw Request. Agent reserves the right to require originals of any such documentation.
(i) Photographs. Date-stamped progress photographs of the Project Site, taken no more than five (5) days prior to the date of the Draw Request, in sufficient number and detail to document the current status of the Work. Photographs shall include exterior views of the Project Site from multiple angles, interior views of completed and in-progress Work, and close-up photographs of any areas identified by the Construction Consultant as requiring attention.
(j) Permits and Approvals. Copies of any new permits, governmental approvals, or inspection sign-offs obtained since the prior Draw Request, including, without limitation, building permits, work permits, temporary permits, and inspection reports issued by the New York City Department of Buildings or any other governmental authority having jurisdiction over the Project.
(k) Change Order Log. An updated Change Order log showing all pending and approved Change Orders, including, for each Change Order, a brief description, the date submitted, the date approved (or current status if pending), the cost impact (increase or decrease to the GMP), the schedule impact (increase or decrease in construction duration), and the cumulative effect of all approved Change Orders on the GMP and the Approved Budget.
Section 4.4 — Agent's Review and Approval
(a) Agent, in consultation with the Construction Consultant, shall review each Draw Request for completeness, accuracy, and conformity with the requirements of this Agreement. Agent may request additional documentation, information, or clarification from Borrower, the General Contractor, or the Construction Consultant in connection with its review. Borrower shall promptly provide any such additional documentation, information, or clarification.
(b) Agent may withhold approval of any Draw Request, or any portion thereof, if any of the following conditions exist:
(i) Any required supporting documentation described in Section 4.3 has not been delivered, or any such documentation is incomplete, inaccurate, or otherwise unsatisfactory to Agent;
(ii) The Work covered by the Draw Request does not conform to the Approved Plans, the GMP Contract, or applicable laws, codes, or governmental requirements;
(iii) The Construction Consultant has not approved or has objected to the Draw Request or any portion thereof;
(iv) An Event of Default exists under this Agreement, the Loan Agreement, or any other Loan Document, or the making of the requested Advance would result in an Event of Default;
(v) The Project is Out-of-Balance and Borrower has not cured the Out-of-Balance condition in accordance with Section 3.5(b);
(vi) The Title Endorsement reveals any title exception, lien, encumbrance, or other matter not previously approved by Agent; or
(vii) Any other condition to the making of an Advance set forth in this Agreement or the Loan Agreement has not been satisfied.
(c) Partial approvals shall be permitted. If Agent approves a Draw Request in part, Agent shall specify in writing the portions of the Draw Request that have been approved and the portions that have been denied, together with a reasonably detailed explanation of the basis for each denial. Amounts denied may be re-submitted in a subsequent Draw Request upon satisfaction of the applicable conditions.
Section 4.5 — Funding Mechanics
(a) Approved Advances shall be funded by Agent by wire transfer of immediately available funds to (i) the escrow account maintained by Sentinel Title & Escrow Company (or such successor title company as Agent may approve) for the purpose of disbursing funds to the General Contractor and other payees identified in the Draw Request, or (ii) directly to the Project Account maintained by Borrower at Ironclad National Bank, N.A. (ABA Routing Number: 021-003-178), as Agent may direct.
(b) Borrower shall maintain the Project Account as a segregated deposit account, separate and apart from all other accounts of Borrower and its Affiliates. All Loan disbursements shall be deposited into the Project Account, and all payments for Project costs shall be made from the Project Account. Borrower shall not commingle funds in the Project Account with funds from any other source (other than Equity Funds and Mezzanine Loan proceeds deposited therein for the purpose of paying Project costs). Agent shall have the right to impose a cash management arrangement with respect to the Project Account, including, without limitation, requiring dual signatory authority or restricting withdrawals, upon the occurrence of an Event of Default.
Section 4.6 — Final Advance
The final Advance hereunder (including the release of Retainage pursuant to Section 3.3) shall be conditioned upon the satisfaction of all of the following conditions, in addition to all other applicable conditions set forth in this Agreement:
(a) Final Completion shall have occurred, as certified in writing by the Construction Consultant;
(b) Final unconditional lien waivers shall have been delivered from the General Contractor and from all subcontractors, sub-subcontractors, materialmen, and suppliers;
(c) A current as-built ALTA/NSPS survey of the Project Site shall have been delivered, certified to Agent and the title company, showing the completed Project and all improvements thereon;
(d) A temporary certificate of occupancy (TCO) or permanent certificate of occupancy (CO) shall have been issued by the New York City Department of Buildings for the Project;
(e) A final date-down Title Endorsement shall have been delivered confirming no mechanic's liens, judgment liens, or other title exceptions not previously approved by Agent;
(f) The project architect's final certificate shall have been delivered, certifying that the Project has been completed in substantial conformity with the Approved Plans;
(g) The Construction Consultant's final written sign-off shall have been delivered, confirming Final Completion and recommending the release of Retainage; and
(h) All other conditions to the release of Retainage set forth in Section 3.3(c) shall have been satisfied.
ARTICLE 5 — BUDGET AND CHANGE ORDERS
Section 5.1 — Approved Budget; Line-Item Reallocations
(a) The Approved Budget, attached hereto as Exhibit A and incorporated herein by this reference, consists of hard-cost and soft-cost line items totaling Nine Hundred Twenty Million and No/100 Dollars ($920,000,000.00), including sub-line items within the GMP of Four Hundred Twelve Million and No/100 Dollars ($412,000,000.00). The Approved Budget constitutes the exclusive and comprehensive budget for the construction of the Project and the application of all sources of funds.
(b) Borrower may reallocate amounts among line items within the Approved Budget, subject to the following limitations and procedures:
(i) Reallocations Within Hard Costs. Borrower may reallocate amounts among hard-cost line items within the Approved Budget without Agent's prior written consent, provided that no individual reallocation exceeds Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), and the aggregate of all such reallocations made without Agent's consent does not exceed Two Million and No/100 Dollars ($2,000,000.00). All such reallocations shall require prior written notice to Agent, delivered no later than the date of submission of the next Draw Request.
(ii) Reallocations Between Hard Costs and Soft Costs. Any reallocation of amounts from soft-cost line items to hard-cost line items, or from hard-cost line items to soft-cost line items, shall require Agent's prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed.
(iii) Reallocations from Contingency. Any reallocation of amounts from any Contingency line item shall require Agent's prior written consent if such reallocation, individually or cumulatively with all prior reallocations from Contingency, exceeds One Million and No/100 Dollars ($1,000,000.00).
(c) All reallocations requiring Agent's consent pursuant to Section 5.1(b) shall also require confirmation from the Construction Consultant that the remaining Contingency, after giving effect to such reallocation, is adequate to cover reasonably anticipated cost overruns, unforeseen conditions, and other contingent costs for the remainder of the construction period.
(d) Agent shall maintain a current version of the Approved Budget, reflecting all approved reallocations and Change Orders, and shall make such updated budget available to Borrower upon request.
Section 5.2 — Change Orders
(a) No Change Order to the GMP Contract shall be effective for purposes of this Agreement without the following approvals:
(i) Borrower's Approval. Every Change Order to the GMP Contract shall require Borrower's prior written approval.
(ii) Agent's Approval. Agent's prior written consent shall be required for any Change Order that (A) individually increases the GMP by more than Five Hundred Thousand and No/100 Dollars ($500,000.00), (B) cumulatively (together with all prior Change Orders) increases the GMP by more than Five Million and No/100 Dollars ($5,000,000.00), (C) extends the construction schedule by more than thirty (30) days beyond the then-current Projected Substantial Completion Date, or (D) materially alters the scope, quality, design, or character of the Project. For purposes of clarity, Change Orders that individually or cumulatively decrease the GMP do not require Agent's consent (but shall require notice to Agent), except to the extent such Change Orders materially alter the scope, quality, design, or character of the Project.
(b) Each request for Agent's consent to a Change Order shall be submitted to Agent in writing and shall include: (i) a detailed description of the proposed change, including the reason for the change; (ii) the cost impact of the proposed change (showing the increase or decrease in the GMP and the impact on each affected line item of the Approved Budget); (iii) the schedule impact of the proposed change (showing the increase or decrease in the construction schedule and the impact on the Projected Substantial Completion Date); and (iv) an updated cost-to-complete analysis reflecting the proposed change.