By: Vincent Georgette
When people think of the Four Seasons Hotel in New York, the word “excellence” is usually what comes to mind. When presented with the opportunity to represent one of our institutional lenders in a leasehold financing transaction concerning the Four Seasons Hotel in midtown Manhattan, we recognized the importance of getting the transaction done right.
The difficulty with any leasehold financing transaction is the lender’s security is not a “tangible” asset like a commercial office building or a residential home that you can foreclose upon. Rather, the asset is the rights and interests that flow from the lease governing the relationship between your borrower and its landlord.
As was to be expected, the asset that was being secured in this deal was a ground-lease between our borrower and the landowner of the property upon which the Four Seasons stands. The ground-lease was highly complex and voluminous, which did not make the transaction easy. To further complicate the deal, the cash flow to pay the rent obligations under the ground-lease and cover the debt service on the loan emanated from an equally sophisticated sub-lease between our borrower and the Four Seasons. Many protections were previously negotiated and built into both leases by the counsel for the landlord and the Four Seasons. However, we needed to flesh out the salient provisions that were most important in protecting the asset of our client, particularly the rights of a lender in a bankruptcy and the disbursement of casualty and condemnation proceeds.
In the end, we were able to work out a deal structure that protected our client’s interest while satisfying the demands of the other parties involved in the transaction.
We are proud to have participated in shaping how the business of one of the great landmarks of Manhattan is conducted.