Blank Rome Represents CTL Capital LLC in Construction Mortgage Financing for Development of The New School in NYC
A Blank Rome team represented CTL Capital LLC, as lender, in a $194-million construction mortgage financing that was secured by property at 301 First Avenue, New York, NY, which is being converted to student dormitories for The New School, a private university (the “University”) located in New York City. The transaction closed on April 21, 2020.
The borrower—two entities affiliated with GFP Real Estate, a Manhattan-based developer—and the University created a complex structure to permit the property to be financed and to enable the University to qualify for an exemption from New York City real estate taxes. First, a ground lease was entered into between the two borrower entities. Then, the borrower-ground lessee filed a declaration of condominium, creating separate leasehold condominium units for the University dormitory and for the parking garage retained by the borrower. Finally, the borrower and the University entered into an installment sale agreement pursuant to which the University agreed to buy the leasehold condominium unit for installment payments to be paid over a long contract term. In addition to permitting the University to qualify for exemption from real estate taxes, the structure enabled the loan to qualify as a “credit tenant” financing, with loan pricing tied to the University’s strong credit rating. As part of the closing, an existing mortgage encumbering the fee interest was assigned to the new lender to permit a substantial mortgage tax savings.
There were some complications due to the COVID-19 pandemic. Notably, at the time of closing, the New York City Register—where mortgages are filed—was open and operating, but the New York County Clerk’s Office—where construction related filings are made—was not open. The parties signed three mortgages to comply with New York’s Lien Law, but the one securing construction advances was delivered in escrow pending the opening of the Clerk’s Office, and future advances for construction will be conditioned on the re-opening of the Clerk’s Office.