I Empire State Development

FOR CONSIDERATION April 17, 2017

TO: The Directors

FROM: Howard A. Zemsky

SUBJECT: City (New York County) -James A. Farley Building Redevelopment & Train Hall - Moynihan Station Civic and Land Use Improvement Project

REQUEST FOR: Authorization for the Disposition, Financing, and Redevelopment of the James A. Farley Post Office Building and Annex, including completion of the Daniel Patrick Moynihan Train Hall; and Authorization to Take Related Actions

I. Authorization Summary

Contractual Structure: Triple-net Lease+ Required Tenant Work

Developer-Builder Team Entities: Moynihan Train Hall Developer LLC Moynihan Interim Tenant LLC RVS Partners LLC , LP. Vornado Realty, L.P. Skanska USA Building, Inc. Skanska USA Civil Northeast, Inc.

Term of Lease: 99 years

Initial Payment: $230 million

PILOT: Thirteen (13) year fixed period and then calculated annually in accordance with commercial tax assessment procedures

Description of Required Tenant Work: Adaptive re-use of the Farley Building in order to provide for a new Penn Station train hall for Long Island Railroad and west of 8th Avenue with elevator and escalator

Empire State Development 633 Third Avenue, New York, NY 10017 (212) 803-3100 I www.esd.ny.gov access to the existing station platforms, thereby relieving congestion at existing Penn Station and supporting the growth of Manhattan's Far West Side

Fixed-Price Amount for Required Tenant Work: $1.264 billion

Other Project Costs, Including, Costs Excluded from the Fixed Price amount Project Management and Overall Project Contingency: $330 million

Funding Sources: Empire State Development Moynihan Interim Tenant LLC Federal Rail Administration Amtrak Metropolitan Transportation Authority The Port Authority of New York and New Jersey

Key Transaction Documents: Agreement of Lease Development Agreement+ Completion Guaranty PILOT Agreement+ PILOT Guaranty City Project Agreement Condominium Declaration & By-laws Amtrak Development Agreement MTA Force Account Agreement and Project Agreement Memorandum of Understanding with the Dormitory Authority of the State of New York (DASNY)

II. Background

Since last summer, this Project has been presented to the Directors several times, including progress information reports and requests for Directors action in September and January regarding the adoption and affirmation of a modification and supplement to the Project's General Project Plan and the authorization of the Interim Development Agreement and Interim Lease Agreement with Moynihan Train Hall Developer LLC. While little has changed regarding the structure of the Project, the following brief background information may be helpful.

2 In January of 2016, Governor Andrew M. Cuomo announced an initiative to overhaul large portions of the Penn Station complex. In furtherance of that initiative, New York State Urban Development Corporation d/b/a Empire State Development ("ESD" or the "Corporation") with the Metropolitan Transportation Authority ("MTA"), MTA's operating entity The Company ("LIRR") and National Passenger Railroad Corporation ("Amtrak" and ESD, MTA, LIRR and Amtrak collectively the "Project Sponsors") are jointly pursuing the private redevelopment of the ESD-owned land and improvements known as the James A. Farley Post Office Building and Annex property (the "Farley Building" or the "Property") located on a super block bounded by Eighth and Ninth Avenues and West 31st and 33rd Streets and located on a slab supported over and above the New York Pennsylvania Station ("Penn Station") train shed (the "Train Shed") in which are located the Penn Station passenger platforms and train tracks used by LIRR and Amtrak.

To effectuate the redevelopment of the Farley Building, ESD, in consultation with the other Project Sponsors, conducted a competitive request for proposals ("RFP") process for the lease disposition and redevelopment of the Farley Building (the "Project") including a new commuter and intercity train hall. The process resulted in conforming proposals from several major real estate development teams, which were reviewed, analyzed and evaluated by an Evaluation Committee representing the Project Sponsors supported by Technical Committees in the areas of railroad operations, real estate, finance and design. The submissions of the respondents that provided the required best and final offers were evaluated per the evaluation criteria and weightings set forth in the RFP. The respondent recommended by the Evaluation Committee is RVS Partners LLC, a team composed of Vornado Realty, LP. ("Vornado") and The Related Companies, LP. ("Related"), as project developers and equity investors, and a joint venture of Skanska USA Building, Inc. and Skanska USA Civil Northeast, Inc. (collectively, "Skanska"), as the developers' construction contractor.

The Project includes: (i) an approximately 250,000 square foot train hall (the "Train Hall"); (ii) approximately sixteen passenger vertical circulation points between the Train Shed and the Train Hall; (iii) approximately 110,000 square feet of LIRR and Amtrak back-of-house space (e.g., offices, security, storage, baggage handling facilities, ·etc.) and passenger facing operations space (e.g., ticket counters and facilities, information counters, baggage receiving counters, waiting areas, etc.)( such space respectively the "LIRR Unit" and the "Amtrak Unit"); (iv) a mid-block entrance hall (the "Entrance Hall"), (v) a retail corridor along the 32°d Street axis connecting the entrance to the Entrance Hall and Train Hall (the "32°d Street Corridor") that will also provide entrances to new commercial space, (vi) approximately 115,000 square feet of transportation-oriented retail space ("Retail Unit"); (vii) an improved Train Shed ventilation system (the "Train Shed Ventilation System"); (viii) approximately 637,000 square feet of commercial use space throughout the Farley Building (collectively, the "Commercial Unit"); (ix) new

3 building systems and loading docks; (x) full renovation of the Farley Building exterior; and (xi) other improvements.

In accordance with the New York State Urban Development Corporation Act (the "UDC Act"), the Project is subject to the General Project Plan for the Moynihan Station Civic and Land Use Improvement Project, dated August 14, 2006 (the "2006 GPP"), as amended on March 15, 2007 (the "2007 Amendment"), as further amended by the Final Amended General Project Plan Phase 1, dated June, 2010 (the "2010 Amendment"), and as further modified and supplemented by the Modified Supplement to the General Project Plan for the Moynihan Station Civic and Land Use Improvement Project, dated January 23, 2017 (the "2017 Supplement"; and collectively, the 2017 Supplement, the 2010 Amendment, the 2007 Amendment, and the 2006 GPP, the "GPP").

Ill. Transaction Overview

James. A. Farley Building Lease

ESD, as owner/landlord, will triple net lease (i.e., solely the tenant is responsible for all costs relating to the leased real estate such as maintenance, operation, insurances, taxes, insurance, assessments, etc.) the Farley Building to Moynihan Interim Tenant LLC ("Tenant"), a new special purpose entity owned by subsidiaries of Vornado and Related, pursuant to an Agreement of Lease (the "Lease") with a 99- year term. The Lease includes those spaces subject to existing leases to the United States Postal Service ("USPS"; and such leases collectively, the "USPS Lease") that are assigned to and assumed by the Tenant. The Lease provides two Tenant- generated sources of funds for the Train Hall Work (as defined below): (i) the $230 million Tenant payment to occur at Financial Close (as defined below) and (ii) the rent and payments in lleu of taxes ("PILOT"; and PILOT and rent, collectively "rent/PILOT") that Tenant pays to ESD over the Lease term.

Train Hall Development Agreement

While the Lease covers the Tenant's redevelopment of the entire Property, including all the commercial development and the 32"d Street Corridor, the Development Agreement covers the Train Hall Work, as described below. ESD will enter into a development agreement (the "Development Agreement), with Moynihan Train Hall Developer LLC (the "Developer"), a new special purpose entity that is an affiliate of the Tenant and is owned (as is the Tenant) by subsidiaries of Vornado and Related. The Tenant will provide the Developer with a license to perform the Train Hall Work in the Farley Building and the Train Shed. Developer will engage Skanska (the "Contractor") to perform the Train Hall Work. Pursuant to the Development Agreement, ESD will disburse from various funding sources to the Developer for the Train Hall Work in an amount equal to approximately $1.264 billion (the "Fixed-Price

4 Amount") subject to adjustments for ESD-approved change orders and certain excluded items as discussed below. In addition, ESD will disburse approximately $330 million (the "Other Project Costs Amount") for other Project related costs, including, such change orders and such excluded items, as well as project management costs, and the overall project contingency as discussed below.

The "Train Hall Work" refers to all work as set out the Development Agreement that the Developer will cause the Contractor to perform in the Farley Building and in the Train Shed, including: demolition and abatement of existing concourses, mezzanines, skylights, ceilings, and roof; foundation work and strengthening and erection of steel, including for new and redeveloped concourses and mezzanines and the Train Hall and Entrance Hall skylights; construction in the Train Shed including erection and removal of protective shields and caissons, new vertical circulation (elevators, escalators, and stairs) to the Train Hall, and completion of the platform ventilation system beneath the Farley Building that serves the Train Shed; fabrication, erection, and installation of the Train Hall and Entry Hall skylights; construction and finishing of the Train Hall and Entry Hall atriums; restoration of the landmarked historic Farley Building fabrication and installation of elevators and escalators; construction of the core and shell of the LIRR Unit and the Amtrak Unit; construction of the core and shell and fit-out of the Amtrak baggage handling facilities; construction of the core and shell of the Train Hall portion of the Retail Unit; construction (if ESD so elects) of the core and shell of the space related to The Port Authority of New York and New Jersey (the "Port Authority") AirTrain service; construction of the entrances at the midblock, at Eighth Avenue (at the corners of 31st and 33rd Street) and Ninth Avenue and the 33rd Street mid-block passenger vehicle driveway; electrical and plumbing work throughout the Train Hall Work; testing of materials, systems and equipment; and design and engineering work with respect to the all of the . foregoing.

James A. Farley Building Condominium Declaration & By-laws

After financial close on the Project by ESD with the Tenant and the Developer (the "Financial Close") and sufficient completion of the Train Hall Work to allow surveying of condominium units, ESD, as the declarant, will subject the Farley Building to a commercial condominium regime pursuant to Article 9-B of the Real Property Law. The Farley Building will become a commercial condominium (the "Condominium"). The principal condominium documents are the "Declaration", in which ESD, as the owner of the Property, creates the Condominium, establishes the "Condominium Association" (responsible for operating the Condominium), and adopts the initial "By-Laws of the Condominium" (the rules by which the condominium units and the Condominium Association will· operate; and the Declaration, By-Laws of the Condominium and the related Condominium documents, collectively the "Condominium Documents"). Initially, ESD will own each unit (each a "Unit") of the Condominium and the Lease will be severed into multiple

5 leases (each, a "Declarant lease") each for a certain Unit. After Condominium formation and completion of the Train Hall Work: (w) the Train Hall, the Entrance Hall, the 32nd Street corridor, the building exterior, the building systems and other areas that are not within the Units will become common elements of the Condominium, (x) fee ownership of the Amtrak Unit will be transferred to Amtrak, (y) the MTA Unit will be leased to the MTA for a term of approximately 99-years, and (z) the locations of the Units will be confirmed b.ased on the final as-built conditions and, to the extent necessary, ESD shall amend the Declaration to conform therewith.

IV. Summary of Train Hall Funding

An aggregate of $1.594 billion from the sources listed below is expected to be available to ESD for the funding of the Fixed Price Amount and the Other Project Costs Amount.

1 ESD State Approximately $550 Million from State funds appropriated for the Appropriation Moynihan Train Station (an additional $150 Million in State appropriated funds will repay a mortgage loan that currently encumbers the Farley Building) (State Fiscal Year 2017-18 Budget Materials}

2. Amtrak $105 Million (Development Agreement between ESD and Amtrak) Contribution

3. MTA Funding $100 Million (Funding Agreement between ESD and MTA) 4. Port $150 Million (Funding Agreement between ESD and the Port Authority Authority) 5. Federal $62 Million (combination of United States Department of Grants Transportation ("USDOT") Congestion Mitigation and Air Quality Improvement ("CMAQ'') Program and Tier Ill storm resiliency grants) 6. Tenant $230 Million up-front payment made by the Tenant pursuant to Contribution the Lease 7. PILOT Approximately $400 million financing to be repaid by the Financing rent/PILOT revenue stream

V. Summary of Key Transaction Documents & Essential Terms and Conditions

Agreement of Lease • Tenant will be responsible for the costs to complete the build out of all portions of Farley that are not part of the Train Hall Work.

6 • The Tenant's design and construction work shall be in accordance with New York State Uniform Fire Protection and Building Code (the "State Code") as administered by the Dormitory Authority of the State of New York ("DASNY") pursuant to the DASNY Agreement (as defined below). • There will be minimum commercial and retail usage requirements as such usage affects the generation of the rent/PILOT. • Tenant will pay rent/PILOT for the Commercial Unit and the Retail Unit (including the portions that are part of the Train Hall Work and the 32°d Street Corridor). • For the 32°d Street Corridor, the Lease requires that retail uses occupy most of the corridor frontage with an average depth of at least ten feet. • The Lease is subject to certain easements for the Farley Building in favor of Amtrak, MTA, LIRR and New York City Transit Authority regarding equipment necessary for integration of the Train Hall and the Train Shed and access and egress of passengers, employees, agents, contractors, etc. • Prior to commencing construction work, other than the Train Hall Work that is covered by other guaranties, Related and Vornado, or a satisfactory replacement guarantor, must provide a completion guaranty with respect to such work.

Train Hall Development Agreement & Completion Guaranty • The Developer warrants that the Train Hall Work will be completed for the Fixed Price Amount (i.e., $1.264 billion), as detailed in the Development Agreement's schedule of values for each portion of the work. The fixed-price excludes (A) ESD directed change orders and (B) costs of: i. delays caused by any Project Sponsors; ii. concealed and environmental conditions (e.g., conditions requiring replacement of existing fireproofing materials, deteriorated steel, asbestos materials, etc.); iii. discovery of unknown historic features; iv. legally required remediation of preexisting Train Shed environmental conditions discovered due to Contractor's performance of Train Hall Work; v. certain Train Hall Work related Amtrak costs and fees under the Force Account Agreement between Amtrak and the Developer; vi. construction support work for Contractor by Skidmore Owings & Merrill and Parsons Brinckerhoff; vii. Contractor's fit-out of the Amtrak Uri it. These excluded items are budgeted to be paid from the Other Project Costs Amount (i.e., $330 million). • The Developer and the Contractor will enter into a design-build construction contract. Pursuant to that contract, the Contractor, on behalf of Developer, will perform the Train Hall Work; be responsible for all plans and specifications; comply with the terms of all applicable agreements and legal requirements; and obtain all approvals required for and after the commencement of construction. ESD must review for approval the Developer's and Contractor's proposed

7 changes to Train Hall Work plans that have been previously approved by ESD and the Train Hall Work submittals (e.g., shop drawings, samples, specifications, etc.). • Except as described above, the Developer is responsible for all other concealed conditions in Farley including generally concealed conditions or unknown and unusual conditions that are materially different from the ESD approved plans for the Train Hall Work. • The Developer is responsible for and indemnifies the Project Sponsors against environmental conditions and remediation for the performance of the Train Hall Work, except conditions caused by any of the Project Sponsors or existing in the Train Shed prior to the date of the Development Agreement. • ESD indemnifies the Developer against environmental liabilities caused by the Project Sponsors or existing in the Train Shed prior to the date of the Development Agreement. • The Development Agreement incorporates the Memorandum of Environmental Commitments that sets out standards and requirements for Project construction and the mitigation of environmental adverse impacts identified in the environmental review of the Project. • The amount of the Fixed Price will be disbursed to the Developer by ESD against the percentage of the Train Hall Work performed. The conditions for each disbursement also require retainage, the required forms of lien waivers, and reports and relevant documentation regarding contracting and subcontracting with State-certified Minority-owned Business Enterprises, Woman-owned Business Enterprises, and Service Disabled Veterans Business Entities. • The Development Agreement also provides the process for final payment, ESD's offset and withholding rights, and procedures for substantial completion, punch list, and acceptance. • The Developer must provide a satisfactory construction sequence and milestones that are subject to procedures for delays, extensions, and delay compensation as provided in the Development Agreement. The Developer must provide monthly progress reports as described in the Development Agreement. • The Developer's obligations to perform the Train Hall Work under the Development Agreement are jointly and severally guaranteed pursuant to the Train Hall Work guaranties provided by Related, Vornado and the Contractor's parent corporation Skanska AB.

PILOT Agreement & PILOT Guaranty • Tenant will pay ESD quarterly rent/PILOT pursuant to the Lease and the PILOT Agreement (the "PILOT Agreement"), to be entered into between ESD and Tenant, that provide for: i. an initial fixed payment PILOT period of thirteen years (commencing on the date of the Financial Close during which rent/PILOT Payments will be

8 fixed according to the PILOT Agreement (such period, the "Fixed PILOT Period"); and, ii. after the Fixed PILOT Period the amount of rent/PILOT payments will conform in general to methods of taxation then in effect for similar income-producing commercial property in the City of New York with the amounts due to be equal to the actual real estate taxes that would be due that would apply if the PILOT generating portions of the Farley Building were not owned by ESD and part of an ESD project. • The Tenant's obligation to pay rent/PILOT is guaranteed by Related and Vornado, or a satisfactory replacement guarantor, until the earlier to occur of: i. with respect to any portion of the Project for which a completion guaranty is delivered, the later of (x) the date of substantial completion of such portion of the Project, (y) date the Tenant surrendered all the space leased pursuant to the Lease or the Declarant Lease under which such portion of the Project is demised to the Tenant, and (z) the date the Declarant Lease covering such portion of the Project is assigned in a bona fide transaction to a party not under the control of Related or Vornado; and ii. with respect to a portion of the project for which a completion guaranty has not been delivered, the date the Tenant surrenders all of the leased space pursuant to the lease under which such portion of the Project was demised to the Tenant.

City Project Agreement • The Project Agreement between ESD and The City of New York (the "City") provides: i. that the City Department of Finance will assess the PILOT generating portions of the Farley Building and calculate the actual tax amounts, and ii. for the apportionment of rent/PILOT between the ESD and the City. • Such apportionment of the rent/PILOT shall be as agreed between ESD and the City, but is expected to: i. fund the costs and debt service for ESD financing for the Train Hall Work; ii. establish, maintain and replenish (x) a $50 million reserve fund to fund the Project Sponsors' percentage share of capital improvements, capital maintenance, capital repair and replacement costs relating to the Condominium's general common elements and the Train Hall related common elements and (y) reserve funds required to be maintained under any ESD financing for the Train Hall Work; iii. until the fortieth anniversary of the date that the Train Hall becomes operational, to reimburse ESD for Project costs, and iv. any excess, after payment of the forgoing (i), (ii) and (iii) would be paid to the City.

9 Condominium Declaration and By-laws • The affairs of the Condominium overall shall be governed by a board of managers of the Condominium (the "Condominium Board") and the affairs of the portions of the building used for retail or by Amtrak and MTA, along with the Train Hall and certain common elements related to the train hall, shall be governed by a board of managers for such property (the "Train Hall Board" and together with the Condominium Board, the "Boards"). • If a Declarant Lease is in effect with respect to a Unit, then ESD shall not have a voting seat on the Boards with respect to that Unit; however, ESD may designate an individual to (i) attend and observe all board meetings and (ii) have the right to veto any action of a lessee under a Declarant Lease that would constitute an "Event of Default" under a Declarant Lease, or would violate any applicable laws or the GPP. • To the extent an "Event of Default" does occur under a Declarant Lease, or in the event the MTA board member is not in good standing, ESD may replace the applicable board member(s) designated by the applicable lessee(s). • In the event a Declarant Lease is terminated due to a failure by the lessee thereunder to pay its share of common charges to the Condominium, ESD shall have a certain period in which it must attempt to find a replacement lessee. If ESD is unable to find a replacement lessee within such period, the Condominium Board can cause ESD to lease the applicable Unit(s) to a replacement lessee of their choosing if such replacement lessee, at a minimum, agrees to pay any deficiency in common charges or rent/PILOT resulting from the default by the prior lessee. ESD shall maintain a list of prequalified brokers who shall be available to source a replacement lessee. • Generally, ESD has no other monetary liability under the Declaration, except to the extent arising from ESD's or its Affiliates' own bad faith, gross negligence or willful misconduct. • Under the Declaration, ESD's consent will be required in the following circumstances: i. changes to the hours of operation of the Train Hall and certain deviations therefrom, ii. installation of and certain alterations to exterior signage on the Building, iii. alterations to the passenger information signage and retail information signage, and iv. termination of the Condominium. • The Condominium will be subject to certain easements for the Farley Building in favor of Amtrak, MTA, LIRR and New York City Transit Authority regarding equipment necessary for integration of the Train Hall and the Train Shed and access and egress of passengers, employees, agents, contractors, etc. • There can be no amendment to the Declaration or the By-Laws which would affect ESD without ESD's consent and, in addition, ESD has certain rights which shall not be assigned to any lessee under a Declarant Lease, including rights with

10 respect to the administration of State Code, casualty and condemnation, the GPP, the AirTrain, floor plan revisions and use, signage, termination of the condominium, further assurances, intellectual property and exculpation.

Declarant Leases: Conveyance of Amtrak Unit: Leasing of MTA Unit; O&M Guaranty • After implementation of the Condominium, ESD will own each Unit and the Lease will be severed to create a separate triple net lease (i.e., the tenant is solely responsible for all costs relating to the leased real estate such as maintenance, operation, insurances, taxes, insurance, assessments, etc.) for each such Unit to be leased to the Tenant or any permitted successor or assign thereof for the remainder of the Lease's ninety-nine {99) year term. • Following formation of the Condominium and the completion of the Train Hall Work: i. the Train Hall, the mid-block entrance hall, the 32°d Street Corridor, the building exterior, the building systems and other areas of the Condominium that are not within the Units will become common elements of the Condominium, . ii. the Amtrak back-of-house and passenger facing operations space will become the "Amtrak Unit", iii. the MTA/LIRR back-of-house and passenger facing operations space will become the "MTA Unit", iv. the retail space in the Project will become the "Retail Unit", v. the other commercial space in the Project will become the "Commercial Unit", vi. the space occupied by USPS in the Project will become the "USPS Unit", vii. the Lease will terminate for the Amtrak Unit, and ESD will convey to Amtrak, for nominal consideration, the fee interest in the Amtrak Unit, viii. the Lease will terminate for the MTA Unit, and ESD will long-term net lease to MTA, for nominal consideration, the MTA Unit, and ix. Related and Vornado, or a satisfactory replacement guarantor, will provide a guaranty of certain operation and maintenance ("O&M") costs to be incurred by MTA, LIRR, and Amtrak during the five-year period commencing upon opening of the Train Hall. • Amtrak and MTA are Project Sponsors and contribute funding for the Train Hall Work, respectively in the amounts of $105 million and $100 million, and pay operation and maintenance costs for the Train Hall and Condominium common area maintenance. Amtrak is a public entity and MTA is a governmental entity, and the terms and conditions of these transfers require that ownership and use of the asset will remain with transferee or another public entity or governmental entity and the transfers are within the purpose and mission of ESD and the UDC Act.

11 MTA Unit Right of First Offer: • If MTA surrenders to ESD all or any portion of MTA's leasehold of the MTA Unit and Amtrak does not exercise the MTA Unit Property Option (described below), then ESD may in its discretion choose to offer to lease to Tenant such surrendered portion of the MTA leasehold interest for its fair market value. If Tenant rejects the offer Tenant will have no further rights to acquire this portion of the surrendered MTA leasehold interest pursuant to the lease. • The Lease gives the Tenant a right of first offer ("ROFO") that Tenant may exercise if (x) ESD does not offer to Tenant the surrendered portion of the MTA Unit leasehold and (y) ESD seeks to convey such portion to a person other than Amtrak, a governmental entity, or an entity owned and controlled (as described in the Lease) by either Related or Vornado. In such event, ESD must notify Tenant of the price for which it seeks to sell the surrendered leasehold interest. Tenant may then acquire such leasehold interest for the price in the notice. • If Tenant elects not to acquire, ESD may sell the leasehold interest to any person, provided, that the price paid by such person is at least ninety-five percent of the price that ESD notified to Tenant. • ESD finds that the fair market value offer and the ROFO arrangement best serves the economic development goals of the project by allowing for the continued productive use and operation of the MTA Unit space while producing a fair market value payment for the surrendered portion of the MTA Unit leasehold, and the transfer would be within the purpose and mission of ESD and the UDC Act.

Option Agreement (between Amtrak and ESD): • ESD and Amtrak will enter into an Option Agreement (the "Amtrak Option Agreement") in which ESD grants to Amtrak certain real estate options that will ensure that space adjacent to the Train Hall and the Amtrak Unit is used or continues to be used in connection with public railroad transportation purposes and the transfers are within the purpose and mission of ESD and the UDC Act. The options are with respect to: • USPS Unit Option Property - ESD will grant to Amtrak an option (the "USPS Unit Option") to acquire space (as described in the Lease) located immediately adjacent to the Amtrak Unit (the "USPS Unit Option Property"). ESD has only a ministerial role in any such disposition. In the event that USPS surrenders to the USPS Unit Tenant the subleased USPS Unit Option Property, then: i. such Tenant surrenders to ESD such leased property; ii. Amtrak remits to ESD, acting on behalf of such Tenant, independently appraised fair market value payment for such property; iii. ESD remits such payment to such Tenant; and iv. ESD effects the fee transfer to Amtrak of such property.

12 • MTA Unit Option Property - ESD will grant to Amtrak an option (the "MTA Unit Option") to acquire the MTA Unit Option Property (as described in the Option Agreement) that MTA chooses to surrender to ESD; provided, however, a portion of the MTA Unit Option Property located immediately adjacent to the Train Hall (the "Consultation Rights Property") may at ESD's discretion be excluded from the option. i. If the surrendered property includes Consultation Rights Property, ESD will consult with Amtrak regarding the disposition of the Consultation Rights Property, and ESD may then elect to: a) offer to lease to Tenant the Consultation Rights Property for such property's fair market value pursuant to the Declarant Lease for the Retail Unit, and if Tenant elects to lease the such Consultation Rights Property, then such property will become part of the Retail Unit, or b) include the Consultation Rights Property within the MTA Unit Option Property; ii. To the extent Amtrak does not elect to exercise the MTA Unit Option, then Amtrak shall have no further rights with respect to such surrendered MTA Unit Option Property and that property will be subject to the Tenant's right of first offer (as discussed above) pursuant to the Lease. iii. If Amtrak elects to exercise the MTA Unit Option, Amtrak shall pay to ESD nominal consideration for the surrendered MTA Unit Option Property because Amtrak will continue to use the MTA Unit Option Property for purposes related to passenger rail transportation back of house and passenger facing operations and Amtrak is a Project Sponsor and has contributed $105 million for the Train Hall Work. Amtrak is a public entity and the terms and conditions of the transfer require that ownership and use of the asset remain with Amtrak or another public entity or governmental entity and the transfer is within the purpose and mission of ESD and the UDC Act.

Abandonment of Transportation-Related Operations or Services: • The Lease provides a process for ESD to quickly lease to the Tenant the abandoned Train Hall, MTA Unit and Amtrak Unit and to replace the financial contributions that MTA and Amtrak made to the operation and maintenance of the Train Hall ("Train Hall O&M") and to the Condominium's common area maintenance ("CAM") associated with the abandoned space, in the event that: a) neither Amtrak nor MTA (including their respective successors and assigns) conducts any transportation-related operations in or through Farley nor ESD (including its successors assigns), through any other governmental entity or governmental sponsored entity, conducts transportation-related services in or through Farley, and, b) the Federal Railroad Administration, or any successor governing body thereto, makes a binding determination that such transportation-related

13 operations or services conducted in or through Farley have been abandoned. • In leasing these spaces, the Tenant must undertake to pay Train Hall O&M as well as rent/PILOT and CAM for these spaces. • For the leasehold of the abandoned space, Tenant must pay to ESD an amount equal to the fair market value of such leasehold less the amount of the reduction in the value of the Retail Unit resulting from such abandonment. • ESD finds that this arrangement best serves the economic development goals of the Project by quickly reactivating the abandoned space, replacing the lost Train Hall O&M and CAM and collecting additional rent/PILOT. • ESD receives the adjusted fair market value of the leasehold for the abandoned space and the transfer is within the purpose and mission of ESD and the UDC Act.

Amtrak Development Agreement • The Development Agreement between Amtrak and ESD will set out Amtrak's commitment to provide $105 million to fund the Train Hall Work and the conditions for Amtrak's relocation of many of its operations and facilities to Farley from Penn Station. • The Amtrak Development Agreement provides for Amtrak's rights to review and approve the design and construction of the Train Hall Work, including the design and construction of the core and shell of the Amtrak Unit and the terms and conditions for ESD's conveyance to Amtrak of the completed Amtrak Unit. • The agreement also provides the terms and conditions for the Amtrak funding and Contractor's performance of the optional fit-out of the Amtrak Unit. • Amtrak will agree to enter into a force account agreement with the Developer in order to provide access to the Penn Station train-shed for the Train Hall Work and Amtrak forces necessary to support the Train Hall Work.

MTA Force Account and Project Agreement • ESD and MTA and/or LIRR will enter the MTA Force Account and Project Agreement (the "MTA Force Account Agreement") which sets out the terms and conditions for licenses that MTA and LIRR will provide for the performance of the Train Hall Work and other Project work on the MTA leasehold premises in the Train Shed and Penn Station. • The agreement provides for MTA's rights to review and approve the design and construction of the Train Hall Work, including the design and construction of the core and shell of the MTA Unit and the terms and conditions for ESD's conveyance to MTA pursuant to a Declarant Lease for the leasehold for the completed MTA Unit. • The agreement also provides the terms and conditions for MTA's funding, and Contractor's performance, of the optional fit-out of the MTA Unit. • ESD will pay MTA and LIRR's staff, fit-out and similar costs (up to an aggregate of $2.5 million) with respect to the Train Hall Work and the other Project Work that

14 affects MTA's and LIRR's premises or operations, for (a) review of the plans and specifications; (b) work required to be performed by MTA and LIRR staff, contractors, or consultants; and (c) related costs and expenses. ESD can fund these costs from the redevelopment funding provided to ESD by MTA for the Train Hall Work.

Memorandum of Understanding with DASNY • ESD and the Dormitory Authority of the State of New York ("DASNY") will enter into a Memorandum of Understanding (the "DASNY Agreement") • ESD shall pay the costs and fees of DASNY for administration of the State Code for the Project, and up to $4 million of such payment will be a credit to ESD's obligation to the Developer for the Fixed Price Amount.

VI. Responsible Parties

Pursuant to State Finance Law Section 139-j and 139-k and the Corporation's policy related thereto, staff has: (a) considered the proposed ability of the Tenant, the Developer, and the Contractor to perform the services provided for in the proposed contract; and (b) consulted the list of offerers determined to be non-responsible bidders and debarred offerers maintained by the New York State Office of General Services. Based on the foregoing, staff considers the proposed contractor to be responsible. Staff has examined the responsibility (as defined in State Finance Law §163 and as provided in ESD's Procurement Guidelines) of the Tenant, the Developer, and the Contractor. Based on this analysis of financial and organizational capacity, legal authority to do business in New York, integrity of principals, and past performance on contracts, staff concludes that the Tenant, the Developer, and the Contractor are responsible vendors.

VII. Funding

As set out above in the Sources of Funds for the Train Hall Work section of Part I of these materials, funding for the Project will be provided by Moynihan Interim Tenant LLC a special purpose entity owned by subsidiaries of Vornado Realty, L.P. and The Related Companies, LP., the State of New York, The Port Authority of New York and New Jersey, the Metropolitan Transportation Authority, National Railroad Passenger Corporation, and the United States Department of Transportation.

VIII. Non-Discrimination and Contractor & Supplier Diversity

ESD's Non-Discrimination and Contractor & Supplier Diversity policies will apply to the Train Hall Work performed under the Development Agreement. The Contractor shall be required to use good faith efforts (pursuant to 5 NYCRR Section 142.8} to achieve a Minority/Womens' Business Enterprise participation goal of 30% of the total dollar value of work performed pursuant to contracts or purchase orders

15 entered into in connection with the construction work performed under the Development Agreement. This is a comprehensive goal for all areas of the project (i.e., professional, construction and purchasing of supplies), and therefore the overall MWBE goal for the project is 30%.

ESD's Service-Disabled Veteran-Owned Business ("SDVOB") policies will also apply to the Train Hall Work. The Contractor shall be required to solicit and utilize SDVOBs in the fulfillment of the requirements of the Development Agreement. The Contractor must demonstrate the use of good faith efforts pursuant to 9 NYCRR §252.2 to achieve a goal of 3% for SDVOB participation.

IX. Environmental Review

The disposition, financing and redevelopment of the Farley Building and Annex permitted under the Transaction Documents (as defined below in Part X Requested Actions) have been covered by environmental review conducted by ESD as lead agency pursuant to the State Environmental Quality Review Act ("SEQRA"). The proposal submitted by the Developer was the subject of a Technical Memorandum ESD had prepared which concluded that there would not be any significant adverse environmental impacts not previously identified and adequately addressed in prior environmental reviews conducted for the project in 2006 and 2010. Therefore, no further SEQRA environmental review is required in connection with the requested authorizations. Additionally, the FRA completed a Re-Exam in March 2017 of the environmental review that had been conducted in 2010 pursuant to the National Environmental Protection Act ("NEPA"), for which a Finding of No Significant Impact had been issued. Based on the information provided in the re-exam, the FRA concluded that there was no additional environmental evaluation warranted under NEPA.

X. Requested Actions

Based on the foregoing, ESD staff requests that the Directors authorize all actions with respect to the disposition and redevelopment of the Farley Building, including all actions described or implied above as well the Lease, Declarant Leases, Development Agreement, Condominium Documents, PILOT Agreement, Project Agreement, DASNY Agreement, Option Agreement, Amtrak Development Agreement, the MTA Force Account Agreement, and all other agreements, instruments and documents related to the Summary of Train Hall Funding (set out above), and all other agreements, instruments, and documents related to the foregoing or with respect to all of the foregoing (all of the foregoing, collectively the "Transaction Documents").

16 XI. Recommendation

Based on the foregoing, ESD staff recommends approval of the requested actions.

XII. Attachments

Resolution

17 April 17, 2017

EMPIRE STATE DEVELOPMENT- NEW YORK (NEW YORK COUNTY)- Penn Station - Farley Complex - Moynihan Station Civic and Land Use Improvement Project - Authorization for the Disposition, Financing, and Redevelopment of the James A. Farley Post Office Building and Annex, Including Completion of the Daniel Patrick Moynihan Train Hall; and Authorization to Take Related Actions

BE IT RESOLVED, that upon the basis of the materials presented to this meeting (the "Materials"), a copy of which is hereby ordered filed with the records of the Corporation, the Corporation hereby finds Moynihan Interim Tenant LLC, Moynihan Train Hall Developer LLC, Vornado Realty, LP., The Related Companies, LP., Skanska USA Building, Inc., and Skanska USA Civil Northeast, Inc. to be responsible; and be it further

RESOLVED, that the Corporation finds that dispositions of the various real estate interests in the James A. Farley Post Office Building and Annex (the "Farley Building") as described or implied in the Materials are in furtherance of and within the Corporation's economic development purposes and mission and the Corporation's constitutive and governing statute, the New York State Urban Development Corporation Act; and be it further

RESOLVED, that the Corporation may dispose of the various real estate interests in the Farley Building as described or implied in the Materials; and be it further

RESOLVED, that the Corporation may redevelop the Farley Building (including work in the New York Pennsylvania Station ("Penn Station") train shed beneath the Farley Building) and receive and disburse for such redevelopment up to $1.594 billion inclusive of the $1.246 billion Fixed Price Amount (as defined in the Materials) and up to the $330 million of the Other Project Costs Amount (as defined in the Materials) as described or implied in the Materials; and be it further

RESOLVED, that the Corporation may enter into an Agreement of Lease and related agreements with Moynihan Interim Tenant LLC for the leasing and redevelopment of the Farley Building as described or implied in the Materials; and be it further

RESOLVED, that the Corporation may enter into a and the Development Agreement and related agreements with Moynihan Train Hall Developer LLC for development of the Daniel Patrick Moynihan Train Hall as described or implied in the Materials; and be it further

18 RESOLVED, that the Corporation may enter into a binding memorandum of understanding the Dormitory Authority of the State of New York ("DASNY") for DASNY's implementation of the New York State Uniform Fire Prevention and Building Code with respect to the redevelopment of the Farley Building and ESD's payment of DASNY's fees and costs for such implementation as described or implied in the Materials; and be it further

RESOLVED, that the Corporation enter into with the National Railroad Passenger Corporation ("Amtrak") a Development Agreement as described or implied in the Materials; and be it further

RESOLVED, that the Corporation enter into with the Metropolitan Transportation Authority and/or The Long Island Rail Road Company force account, development, project, and funding agreements as described or implied in the Materials; and be it further

RESOLVED, that the Corporation enter into with Condominium Documents (as defined in the Materials} and related agreements as described or implied in the Materials; and be it further

RESOLVED, that the Corporation may execute and deliver such agreements, instruments, and documents to further the Project and the transactions described or implied in the Materials, including without limiting the foregoing, each of the Transaction Documents (as defined in the Materials); and be it further

RESOLVED, that the President, or his designee(s), or other Officer of the Corporation be, and each of them hereby is, authorized to take such action and execute and deliver such documents as may be necessary or appropriate to carry out the foregoing Resolutions; and be it further

RESOLVED, that the President, or his designee(s), or other Officer of the Corporation be, and each of them hereby is, authorized to execute and deliver changes, amendments, modifications, and supplements to all such agreements, instruments, and documents as the President, the designee, or other Officer may determine to be necessary or appropriate in order to carry out the foregoing Resolutions.

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19 Item VII.A.