2017 10:11 AM - iapps.courts.state.ny.us

SUPREME COURT OF THE STATE OF NEW YORKCOMMERCIAL DIVISION–COUNTY OF NEW YORK

BERSIN PROPERTIES, LLC,

Plaintiff,

vs.

NOMURA CREDIT & CAPITAL, INC. andNCCMI, INC.,

Defendants.

Index No. 452630/2014

AMENDED COMPLAINT

FILED: NEW YORK COUNTY CLERK 11/22/2017 10:11 AM INDEX NO. 452630/2014

NYSCEF DOC. NO. 80 RECEIVED NYSCEF: 11/22/2017

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TABLE OF CONTENTS

Page

NATURE OF ACTION...................................................................................................................1

PARTIES.........................................................................................................................................6

JURISDICTION AND VENUE......................................................................................................7

SUBSTANTIVE ALLEGATIONS .................................................................................................7

A. The Medley Centre Project......................................................................................7

B. The Loan Agreement. ............................................................................................11

C. Medley Centre’s PILOT Funding And Other Government Support. ....................14

D. Nomura Acted In Bad Faith And Repeatedly Breached The Loan Agreement. ............................................................................................................18

1. Nomura’s Bad-Faith Funding Delays And Unreasonable Demands.........18

2. Nomura’s Improper Refusal To Fund Draw Requests ..............................21

3. Nomura’s Improper Refusal To Extend The Loan....................................23

E. Nomura Continued To Breach The Loan Agreement Even After It Was Extended. ...............................................................................................................31

F. Nomura Acted In Its Own Financial Interests And To The Detriment of Bersin And Economic Stakeholders In Medley Centre.........................................33

G. Bersin, The Local Community, And The Affected Tax Jurisdictions Were Harmed By Nomura’s Misconduct........................................................................38

FIRST CAUSE OF ACTION (Breach Of The Loan Agreement And Breach Of The Loan Agreement By Anticipatory Repudiation).........................................................................39

SECOND CAUSE OF ACTION (Breach Of The Implied Covenant Of Good Faith And Fair Dealing)......................................................................................................................40

PRAYER FOR RELIEF ................................................................................................................41



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Plaintiff Bersin Properties, LLC (“Plaintiff” or “Bersin”), by and through its attorneys,

Quinn Emanuel Urquhart & Sullivan, LLP, for its Amended Complaint against Defendants

Nomura Credit & Capital, Inc. (“Nomura Credit”) and NCCMI, Inc. (“NCCMI,” and together

with Nomura Credit, “Nomura” or “Defendants”), alleges as follows:

NATURE OF ACTION

1. In January 2007, Scott R. Congel, a real estate developer with a proven history of

successful projects, acquired Bersin Properties, LLC, a real-estate company that owned an

underperforming shopping mall in Rochester, New York, called Medley Center. Mr. Congel had

obtained $135 million in financing from Nomura (the “Loan”) to renovate and re-lease the

830,000-square-foot struggling shopping mall. Following the renovations, Mr. Congel had

secured plans for Bersin to expand the property into a 3.2 million-plus square-foot premier

mixed-use center where people would live, work, visit and play. If Nomura had satisfied its

financing obligations, Medley Centre ultimately would have featured a mix of attractions,

including a greatly-expanded retail space, restaurants, hotels (including meeting and conference

centers), office space, apartments, a multiplex movie theater, underground parking, and a 3,000-

seat performing arts center. This expanded Medley Centre would have followed in the footsteps

of another successful project that Mr. Congel helped develop, called Destiny USA, located in

nearby Syracuse, New York, which had achieved great success as a similar regional destination.

2. In addition to creating thousands of jobs, the project would have generated

hundreds of millions of dollars in business, tourism, and tax revenue for each of Monroe County,

New York State, and the Finger Lakes region. The community, including the residents of

Monroe County, local government and tax authorities, and the County of Monroe Industrial

Development Authority (“COMIDA”), enthusiastically supported the development of Medley

Centre—to the point of providing an extraordinary 30-year self-amortizing payment-in-lieu-of-



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taxes (“PILOT”) agreement (described further below). Similarly, the State of New York

expressed its support by designating the project a Qualified Empire Zone Enterprise (“QEZE”),

carrying significant tax benefits (also described further below) to ensure the project’s success.

3. The local government was extremely generous with Medley Centre because it

recognized the property’s enormous potential as a tourist destination, regional amenity, job

creator, and sales tax and hotel tax generator. The County of Monroe Industrial Development

Agency, an entity designed to encourage economic growth of businesses in Monroe County,

along with the Town of Irondequoit (“Town”) and the East Irondequoit School District, agreed to

a very generous PILOT agreement for the project. The PILOT applied substantially all of the

future real-estate tax payments that would have been paid towards debt service to support the

issuance of multiple rounds of 30-year self-amortizing bonds that would provide further

financing beyond the $135 million loan from Nomura. The PILOT bonds would have funded

any and all project costs. The enormously valuable PILOT financing was also fungible, allowing

Bersin to decide how much to borrow and how to apply it over a 30-year period.

4. The PILOT agreement would have been an extraordinary engine for repaying the

Nomura financing and providing the funds to construct new retail space, hotels, residential

buildings, office space, a 3,000-seat performing arts center, and underground parking. Thirty-

year PILOT agreements are extremely rare and difficult to obtain, with correspondingly

significant financial benefits to the developer, making this project uniquely favorable to Bersin.

To Bersin’s knowledge, only a handful of such PILOT agreements have been granted

nationwide: Pyramid’s Destiny USA project benefited from one, which has driven the project’s

growth and continued success. And the New York Yankees and New York Mets each used



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forty-year PILOT bonds, modeled on Destiny USA’s financing, for the successful construction

of their recently-built baseball stadiums.

5. Although Nomura initially appeared willing to fulfill its contractual obligation to

Bersin and fund the Loan, within six months of entering into the loan agreement (the “Loan

Agreement”), the bank began to delay approving Bersin’s funding requests. Then, roughly one

year into the Loan, Nomura and its servicer for the project, Centerline Servicing Inc.

(“Centerline”), began imposing increasingly unreasonable and burdensome conditions on Bersin,

demanding voluminous and repetitive supporting information before granting funding requests.

At the same time, Nomura admitted to Bersin that it was having difficulty obtaining internal

approval to continue funding the Loan. Eventually, Nomura refused to fund $629,000 in draw

requests in January 2009 and $54 million in draw requests in February 2009, as well as a follow-

up $2.8 million draw request from Bersin. Funding these requests would have allowed Bersin to

complete the first phase of the project, after which the property would have become self-

sustaining with revenue from leased tenants supporting the issuance of PILOT bonds that would

have allowed the project to reach its full potential.

6. Even as Nomura became an increasingly uncooperative lender during 2008, and

ultimately refused to honor Bersin’s funding requests, Bersin remained committed to the success

of Medley Centre and its supposed partnership with Nomura. In October 2008, more than three

months before the Loan’s initial maturity date in February 2009, Bersin notified Nomura of its

intent to extend the Loan for an additional year, as Bersin was permitted to do under the Loan

Agreement. In December 2008, two months prior to the initial maturity date, Bersin provided

further written notification to Nomura of the requested extension, and continued following up

through the expiration date of the Loan. On many occasions, Bersin requested necessary



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information from Nomura relevant to the Loan extension, which the bank failed to provide.

Bersin made exhaustive efforts to effectuate the extension, but was stymied by Nomura’s bad-

faith lack of cooperation.

7. It is now clear, based on Nomura’s subsequent disclosures, that the bank

deliberately chose to breach the Loan Agreement in response to changed economic

circumstances. The parties entered into the Loan Agreement in January 2007, when the

economy was strong, financing was plentiful, and Nomura had ample cash to lend out. By 2008,

however, the financial crisis had reached full swing, and Nomura began delaying payments to

Bersin and imposing unreasonable demands for information, while internally Nomura’s

management increasingly pushed back on Bersin’s funding requests due to Nomura’s own

economic pressures. Internal Nomura correspondence from 2008, which Defendants have

produced in this litigation, reveals a desire to be relieved of further funding requests, and angling

for ways to cut off Bersin’s funding due to new financial constraints on the bank.1 By early

2009, Nomura was looking for ways to preserve its capital, and—as it conceded in later public

filings—reducing its commercial lending exposure was one way to do that. Nomura breached

the Loan Agreement to try and free itself from further funding obligations to Bersin.

8. Key Nomura personnel involved in the Medley Centre funding, including

Nomura’s Chief Legal Officer David Findlay, were also responsible for Nomura’s massive

losses in the residential mortgage-backed securities (“RMBS”) market. In a classic case of

robbing Peter to pay Paul, Mr. Findlay (whose conduct in helping manage the RMBS business at

Nomura has previously been found by a federal judge to violate federal securities laws) shored

up Nomura’s balance sheet against its RMBS losses by abandoning the bank’s contractual duties

1 E.g., NOMURA-MEDLEY00049708.



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to commercial borrowers such as Bersin. By putting its own financial interests ahead of its legal

obligations, Nomura unjustifiably breached the Loan Agreement and the duties it owed Bersin.

9. Bersin was dependent on Nomura’s funding, and had based the Medley Centre

development around it. Because of the bank’s refusal to fund the Loan as required under the

Loan Agreement, and its refusal to permit Bersin to extend the Loan’s term as Bersin was

entitled to, Bersin could not complete the renovation and redevelopment of Medley Centre. As a

result, the leasing revenue from the renovated mall, tax breaks, and the supporting PILOT bond

offerings never materialized. Despite Bersin’s best efforts, no other lender stepped in to finance

Medley Centre because Nomura refused to authorize another lender to substitute in its place.

The redevelopment eventually failed due to the lack of funding, and the Medley Centre property

was later sold at a sheriff’s sale with no recovery for Bersin.

10. The catastrophic failure of Medley Centre has caused at least $600 million in

damages to Bersin, exclusive of prejudgment interest, as calculated by Bersin’s financial experts

using contemporaneous and current information, including Bersin’s budgets, leasing records,

development plans, market data, and information on comparable Pyramid properties and other

properties. Bersin’s demonstrated losses arise from the loss of equity and profits from the

redeveloped mall, and a loss of residual development value from the planned expansion of the

mall into a mixed-use development in successive phases of the project. If Nomura had not

breached the Loan Agreement, causing a predictable and entirely avoidable chain reaction of

negative effects, the following sequence of steps would have been fulfilled: (i) Bersin would

have renovated the existing mall; (ii) Bersin would have leased up the mall, as evidenced by the

leasing agreements already in place; (iii) Bersin would have caused COMIDA to issue bonds

pursuant to the agreed-upon PILOT agreement; and (iv) cashflow from the mall’s leases and the



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PILOT bonds would have permitted Bersin to repay the Nomura Loan and continue to expand

the property into a mixed-use development.

11. Nomura’s unjustified decision to cut off funding for Medley Centre violated the

Loan Agreement, broke faith with Bersin, and crippled the project. The withdrawal of funding

led to severe losses for Bersin and devastated Medley Centre, local taxing jurisdictions, and the

surrounding community.

PARTIES

12. Plaintiff. Bersin Properties, LLC is a limited liability company organized under

the laws of the State of Delaware with its principal place of business at 4 Clinton Square, Suite

104, Syracuse, New York 13202.

13. Defendants. Nomura Credit & Capital, Inc. is a Delaware corporation with its

principal place of business located at Worldwide Plaza, 309 West 49th Street, New York, New

York 10019. Nomura Credit was party to the Loan Agreement with Bersin.

14. NCCMI, Inc. is a Delaware corporation with its principal place of business

located at Worldwide Plaza, 309 West 49th Street, New York, New York 10019. After

executing the Loan Agreement, Nomura Credit purported to assign all of its rights, title and

interest in the Loan Agreement to NCCMI.

15. Relevant Non-Parties. Nomura Holdings, Inc. is a Japanese enterprise that

directly or indirectly owns Nomura Credit and NCCMI.

16. Nomura Holding America Inc. is a Delaware corporation with its principal place

of business located at Worldwide Plaza, 309 West 49th Street, New York, New York 10019.

Nomura Holding America Inc. is the principal North American subsidiary of Nomura Holdings,

Inc.



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17. Centerline Servicing Inc. is a Delaware corporation with its principal place of

business at 5221 North O’Connor Boulevard, Suite 600, Irving, Texas 75039. Centerline

serviced the Medley Centre loan on Nomura’s behalf and at its direction.

JURISDICTION AND VENUE

18. Jurisdiction of this Court is founded upon C.P.L.R. §§ 301 and 302. All of the

parties do business in or derive substantial revenue from activities carried out in New York. The

Medley Centre property at issue is located in New York. The drafting, negotiation, and signing

of the Loan Agreement at issue occurred in New York, and the parties’ subsequent

communications regarding Medley Centre and funding requests occurred in the state. Nomura’s

wrongdoing occurred in New York and Bersin experienced losses in New York. Further, in the

Loan Agreement, Bersin and Nomura agreed that New York law governs the Loan Agreement.

19. Venue is proper in this County pursuant to C.P.L.R. § 503(a) because each of the

Defendants’ offices are located here, at Worldwide Plaza, 309 West 49th Street, New York, New

York 10019.

SUBSTANTIVE ALLEGATIONS

A. The Medley Centre Project.

20. The Medley Centre was an innovative project designed to transform and expand a

stagnant mall into an over 3.2 million-square foot premier destination center. The project would

renovate and reinvigorate the existing mall, including adding expanded retail space and a

“ThEATery” complex consisting of a Regal movie theater, restaurants, and a parking deck. The

renovation would have been followed by the addition of hotels (including meeting and

convention space), office space, apartments, a 3,000-person performing arts center, and an

underground parking garage in later phases.



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21. The first phase of the project was the renovation and leasing of the existing

shopping mall, known as Medley Centre, located in the Town of Irondequoit, and part of the

greater Rochester, New York area. The mall experienced some success in the early 1990s but

suffered a significant decline thereafter, prior to its purchase by Bersin in 2005. Bersin

purchased the property with the assistance of a $15.5 million bridge loan from Nomura. Mr.

Congel subsequently purchased Bersin in January 2007, concurrent with Bersin entering into the

$135 million Loan Agreement with Nomura.

22. Medley Centre (when reaching its apex) would have transformed the Rochester

area—creating a premier destination for upstate New York and generating thousands of jobs and

tax dollars, and millions of dollars in tourism revenue, for the County of Monroe, the Town of

Irondequoit, the City of Rochester, and the State of New York. As further described below, a

development of such significance and magnitude was made possible only through a unique

public-private partnership. The partnership combined state and local economic development

programs with the anticipated support of supposedly strong “financial partners,” a role Nomura

claimed it would fulfill.

23. Bersin’s renovation and redevelopment of Medley Centre utilized the experience

of Pyramid Management Group, LLC (“Pyramid”), a prominent real-estate company affiliated

with Mr. Congel. Pyramid owns and manages over a dozen retail properties, generating $4

billion in retail sales annually, in New York, Massachusetts, and Virginia. As Defendant

Nomura Credit wrote in an internal memorandum in October 2007, which described the Medley

Centre development in glowing terms, Pyramid “has extensive experience as the preeminent mall

developer, owner, and operator in New York State and the greater Northeast.” Nomura Credit



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further stated that Pyramid had become “the largest, most innovative privately-held developer

and operator of super-regional destination centers in the country.”2

24. Pyramid’s malls are among the most visited in the United States, with over 190

million customer visits annually. Its mall properties performed strongly and retained their retail

tenants even during the 2008 financial crisis. As noted above, its properties include Destiny

USA, a thriving mixed-use project located in neighboring Syracuse, New York, which is the

largest super-regional destination mall in New York State and has achieved record success. Mr.

Congel was the President and Chief Executive Officer of Pyramid from 1998 to 2007, and had

overseen many of its most successful developments. The Medley Centre development would

have been similar to Destiny USA, offering a mix of attractions—including residential units—

and drawing visitors from other malls in the area and from the broader region, including Canada.

25. As Nomura itself recognized in offering the Loan, the Medley Centre

development was perfectly positioned to thrive, had it received the $135 million in funding that

Nomura contracted to deliver. Monroe County was an underserved retail market, with mediocre

single-level existing malls and no mixed-use entertainment attractions or upscale retail options.

In spite of the strong business community, there were few full-service hotels in Rochester, and

there was an unmet demand for high-end rental apartments, both of which Medley Centre would

have supplied. The Medley complex would have drawn people from a wide geographic area,

with amenities not found nearby, such as a high-end department store, hotels, and a 3,000-seat

performing arts center offering Broadway traveling shows and other live theater or concerts. It

also appealed to current retail trends, with “green” and environmentally-responsible buildings

and a walkable open-air layout.

2 NOMURA-MEDLEY00021624.



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26. While not every shopping mall can be a success, Medley Centre would have been

a “mall killer,” drawing people from other nearby malls with its renovated look and mix of

attractions. It would have provided Bersin with a diversified source of revenue—from stores,

restaurants, hotels, offices, apartments, a performing arts center, and other sources. Each

component of the property would have generated traffic for the rest. The regional demographics

were also good: Rochester had a strong economy, with plenty of good jobs at stable employers,

including the University of Rochester, hospitals, and large corporations. The mall had good

highway access, with five entrances and exits, and was near plenty of high-income earners. As

Nomura favorably noted in an internal memorandum about Medley Centre, the region had 1.15

million people and the mall was “in close proximity to more total wealth than any other

competing property in the Rochester trade area.” Nomura reported that the market “enjoys the

highest density of wealthy households ($100,000+) in all of Upstate New York.”3 The Rochester

area also had many young people with disposable income, as well as 19 colleges and universities

that enrolled over 80,000 students.

27. Bersin had made substantial progress in its development of Medley Centre by the

time Nomura withdrew its funding in early 2009. Bersin had created a thorough development

plan for Medley Centre, designed by Jerde Architects, a leading architectural firm, mapped out

over several years. Bersin had obtained architectural plans for the site, had completed a costly

permitting analysis, had commissioned marketing and feasibility studies of the property (such as

the demand for hotel units), and had obtained economic impact studies of the region. The Town

of Irondequoit had passed a special local law rezoning the property as a Tourism and Resort

Redevelopment District; the law authorized a site redevelopment plan exceeding 3.2 million

3 Id.



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square feet without any further approvals required. Bersin had also negotiated extraordinarily

generous public financing through a 30-year PILOT agreement and tax breaks with the local

government, to follow the funding from Nomura, as explained further below. In addition, Bersin

had undertaken a voluminous State Environmental Quality Review process, which resulted in a

finding of minimal adverse environmental impact from the project.

28. Bersin was also negotiating a Community Benefits Agreement (a labor

agreement) with the AFL-CIO, to obtain reduced labor costs and flexible work rules for

construction. Bersin had an experienced leasing staff in place, with experience from other

Pyramid properties—including established relationships with dozens of retailers—and the Bersin

team was in the process of re-leasing the property with new, higher-paying tenants at the time

Nomura withdrew its funding. As of April 2008, as acknowledged in an internal Nomura

memorandum, the Bersin team had already signed many leases with tenants or the leases were

out for signature.4 At the time of Nomura’s breaches in February 2009, Bersin was negotiating

with dozens of confirmed or potential tenants, including the Westin and Aloft hotel chains,

whose parent company, Starwood Hotels, was negotiating a franchise agreement for the planned

hotels.

B. The Loan Agreement.

29. Considering the crucial importance of Medley Centre to Bersin’s overall finances,

Bersin carefully considered its financing options. It was important that the financial institution

selected to support Medley Centre’s acquisitions, construction, and development stages be well-

known, highly regarded and financially stable. Bersin sought an institution that not only would

lend support to this ambitious project, but would inspire confidence in all of the public




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stakeholders: COMIDA; the Town of Irondequoit; the East Irondequoit Central School District;

Monroe County; local construction companies and their employees; the existing anchors of the

mall such as Macy’s, Sears, and Target; consultants and subcontractors; and the other financial

and business “partners” in the planned expansion. In short, everyone participating or otherwise

interested in Medley Centre was dependent upon the private lender for the project to succeed.

30. Bersin secured funding in January 2007 for renovating and redeveloping Medley

Centre by entering into the Loan Agreement with Nomura Credit, an American subsidiary of the

Japanese bank Nomura Holdings, Inc. Nomura Credit agreed to provide $135 million in funding

for the Loan, from which Bersin would periodically draw to finance the initial renovation and

leasing of Medley Centre, in addition to land purchases and the planned construction of a

multiplex theater and parking garage. The Loan Amount was initially allocated as follows: an

Acquisition Loan in a principal amount of up to $22,615,822, for acquisition of property; a

Building Loan in a principal amount of up to $22,420,000, for hard costs of construction; and a

Project Loan in a principal amount of up to $89,964,178, for soft costs of construction, tenant

improvements, expenses, and other costs. Bersin would pay monthly interest on the Loan and

under the initial terms of the Loan would repay the outstanding principal balance and interest on

February 9, 2009, subject to Bersin’s option to extend the maturity date for up to three additional

one-year terms. Nomura Credit subsequently purported to assign its interest in the Loan to

Defendant NCCMI, in March 2008.

31. Under the Loan Agreement, Nomura Credit was obligated to fund draw

requests made by Bersin up to $135 million, which would allow Bersin to redevelop, improve

and expand Medley Centre. The Loan Agreement also provided for the full disbursement of the

Loan. Upon satisfaction of certain conditions (all of which would have been achieved if Nomura



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had fulfilled its obligations), Section 2.14 of the Loan Agreement required that “Lender shall

advance to Borrower any remaining principal amount of the Loan that shall not yet have been the

subject of a Loan Advance and is not then the subject of a pending Loan Advance ….”

32. Bersin accepted financing from Nomura because it believed the bank to be a

committed partner in Medley Centre. Indeed, Nomura had previously provided a $15.5 million

bridge loan to Bersin under its prior owner in 2005, to finance the mall’s purchase; this Loan

would be used, in part, to pay off the prior loan. Nomura’s public statements supported its

willingness to move forward with the project, including its statement that it was pursuing an

“expanded loan business” in commercial lending, fueled in part by “a strong movement,

especially in Europe and the United States, toward using securitization and derivatives to transfer

risks off the balance sheets of financial institutions.” 2007 Annual Report of Nomura Holdings,

Inc., at 23. Nomura further claimed to have “put in place an integrated system for offering senior

loans, mezzanine financing, and equity financing”—such as the Loan to Bersin—“that can

respond to the funding needs of a wide range of real estate projects.” Id. at 25.

33. Nomura, by entering into the Loan Agreement, represented to Bersin and the

public, including the surrounding community, that it had the financial wherewithal to support

and finance Medley Centre, and would do so. Nomura was aware of Bersin’s existing public-

private partnership with COMIDA, and that Nomura’s Loan and PILOT bonds would together

finance Medley Centre. Nomura was also well aware that its financing package played a crucial

role in the overall success of Medley Centre. The funding was the initial building block for

Bersin, providing sufficient capital to renovate and lease up the existing mall, which would have

generated enough cashflow to make the development self-sustaining without the need for

additional funding beyond the PILOT bonds. Nomura was aware that the first phase would have



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been followed by a second round of financing, in the form of self-amortizing 30-year PILOT

bond offerings, sponsored by COMIDA, a local government entity. Bersin also could have

monetized the property by selling it after renovating the mall and before expanding it into a

mixed-use center.

34. Nomura’s plan for the Loan, at the time it was originated, was to securitize it and

remove the credit risk from Nomura’s balance sheet. Article IX of the Loan Agreement

expressly contemplated the securitization of the Loan. This was consistent with Nomura’s

express strategy, as reflected in an internal Nomura memorandum describing the Loan and

circulated the month prior to execution, to use a collateralized debt obligation or securitization as

an “exit strategy” from the Loan.5 The financial crisis, however, apparently prevented Nomura

from doing so. Unable to offload the credit risk of the Loan to investors, Nomura instead chose

to breach the Loan Agreement.

C. Medley Centre’s PILOT Funding And Other Government Support.

35. After drawing on Nomura’s $135 million in financing to redevelop Medley

Centre, Bersin planned to use additional financing from the County of Monroe Industrial

Development Agency (“COMIDA”), which offered a special payment-in-lieu-of-taxes credit

facility. Bersin initially entered into a 15-year PILOT agreement with COMIDA, consented to

by Monroe County, the Town of Irondequoit, and the East Irondequoit Central School District, in

March 2005. The PILOT agreement was later amended in early 2009, extending the term from

15 years to 30 years. The PILOT agreement would have provided substantial additional

financial backing to Medley Centre, after Nomura’s Loan, through the successive issuance of 30-

year PILOT bonds by COMIDA “as directed by” Bersin (per the terms of the agreement). The




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bond offerings were anticipated to generate $150 million to $350 million in financing. When

Nomura withdrew its funding, Bersin also lost the opportunity to raise and draw upon the PILOT

funding.

36. The PILOT funding was highly favorable to Bersin, and would have allowed

Bersin ample financing to grow Medley Centre from a renovated mall into a larger mixed-use

attraction including additional retail space, hotels, offices, apartments, a performing arts center,

and an underground parking garage. As part of providing the PILOT credit facility, COMIDA

and local affected tax jurisdictions (Monroe County, the Town of Irondequoit, and the East

Irondequoit Central School District) agreed to forgo the payment of substantially all of the

property taxes on Medley Centre and instead allow Bersin to use those funds for development of

the project. Real-estate tax revenue from Medley Centre would thus be transformed into a cash

stream to support the issuance of the bonds by COMIDA. Funds raised from the issuance and

sale of those bonds would have been used to help pay off the Nomura Loan and complete the

renovation and expansion of Medley Centre, while also benefiting Monroe County and the State

with sales taxes, hotel taxes, income taxes, and new jobs. As Nomura itself wrote in an April

2008 internal memorandum describing the project, Bersin “plans to market the PILOT in the

municipal market and potentially return $150 to $350 million in bond proceeds …. The bond

proceeds can be utilized for principal payment reductions of the [$135 million] project loan”

from Nomura.6

37. The PILOT financing had other appealing qualities as well. First, the financing

was fungible, allowing Bersin to choose how much to borrow, and thus how soon the bonds

would be repaid. Second, the financing was very flexible, giving Bersin broad discretion in how

6 NOMURA-MEDLEY 00022055.



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to allocate the funds. The only limitation imposed on Bersin’s use of funds was a requirement

that the funds be used for project-related costs and that any property acquired by Bersin be

contiguous to Medley Centre. Third, the PILOT financing meant that Bersin would not have

been exclusively dependent on a bank loan.

38. Pyramid had already used 30-year PILOT bonds at its Destiny USA development

in Syracuse. That experience would have served as a model for Medley Centre. The bond

offering for Destiny USA was oversubscribed, showing the enormous demand for these bonds.

The bonds performed perfectly, even during the financial crisis. The cashflow from the PILOT

bond offerings for Medley Centre would have provided Bersin ample cashflow to drive growth.

Conversely, Nomura’s breach meant that Bersin could not reach critical mass with the project

and thereby justify issuance of the PILOT bonds, with the result that Bersin was deprived of the

funds the PILOT financing would have provided.

39. Once the existing mall was renovated and leased up with new tenants and the

PILOT bond offerings began, Medley Centre would have become self-sustaining from cashflow

on the property and the PILOT financing. The PILOT bonds would have been issued in multiple

offerings at Bersin’s direction, leading to a constantly-renewing stream of money to pay for

further growth of the mixed-use development. Like a snowball rolling downhill, Medley Centre

would have gained increasing momentum as successive PILOT bond issuances allowed further

expansion, with compounding growth in equity and profits from the property as Bersin added

additional retail, offices, apartments, hotels, and entertainment attractions. Estimates show that

Monroe County and New York State would have each received over a billion dollars in sales

taxes and other taxes from Medley Centre, over a 30-year period, and the project would have

generated thousands of jobs in construction, retail, and related industries.



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40. Bersin also stood to gain significant tax credits and benefits for Medley Centre, as

Nomura itself recognized in an internal memorandum from October 2007 about the project.7

Medley Centre was incorporated into the Monroe County Empire Zone, an area that offered

special incentives from New York State to encourage economic development, business

investment, and job creation. Medley Centre was also designated a Qualified Empire Zone

Enterprise. As Nomura stated in the above memorandum, Bersin, as a QEZE, was eligible to

receive (i) state income tax credits for hiring full-time employees in newly-created jobs; (ii)

investment tax credits and employment incentive credits for businesses that invest in the area;

(iii) property tax abatements, providing a reduction in taxable assessment value based on

renovation or new construction; (iv) real property tax credits, based on the number of new jobs

created; (v) tax reduction credits, also based on new jobs created; and (vi) sales and use tax

exemptions, for property and services used in the Monroe County Empire Zone.8 These

generous incentives would have further propelled Medley Centre’s success.

41. The highly favorable PILOT financing and the QEZE tax incentives, along with

other favorable characteristics of the Medley Centre property, gave the mixed-use center a high

probability of being extremely profitable. As noted previously, Medley Centre was in a

favorable location, with good visibility and highway access, within close driving distance of

high-income earners in the Rochester area. Rochester had a favorable economy, with stable

employers such as universities and hospitals, and average incomes in Rochester were higher than

other upstate New York cities. Medley Centre would have been more appealing than the existing

mall choices in the Rochester area, with higher-end stores, and unique amenities such as a 3,000-

seat performing arts center that would have helped draw a large number of visitors. Medley

7 NOMURA-MEDLEY00004514.8 Id.



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Centre would have been a regional destination, drawing from outside Monroe County, with

cross-traffic from the stores, restaurants, hotels, offices, apartments, and entertainment facilities

that would drive revenue.

42. Bersin had obtained the necessary zoning approvals, too. In February 2009, the

Town of Irondequoit zoning board granted Bersin’s request to rezone certain property at Medley

Centre from “Manufacturing” to “Tourism and Resort Redevelopment,” following an

environmental impact analysis pursuant to the New York State Environmental Quality Review

Act. The Town in February 2009 also granted Bersin’s request for a local law approving the

creation of a Tourism and Resort Redevelopment district for the Medley Centre site. No further

approvals, beyond the issuance of the building permit, were required for the project.

D. Nomura Acted In Bad Faith And Repeatedly Breached The Loan Agreement.

1. Nomura’s Bad-Faith Funding Delays And Unreasonable Demands

43. Beginning soon after the Loan Agreement was finalized, Nomura began acting in

bad faith and shirking its obligations under the Loan Agreement. The bank started to delay

funding numerous draw requests submitted by Bersin, often failing to pay for weeks at a time.

These delays required many follow-up communications by Bersin to Nomura and Centerline, the

bank’s servicer for the Loan, before funds were finally released.

44. Nomura retained Centerline as servicer and effectively controlled its conduct with

regard to Medley Centre. The close cooperation between the bank and servicer was underscored

by the movement in 2008 to Centerline of nearly half a dozen Nomura employees involved with

Medley Centre.

45. Nomura’s funding delays began soon after the Loan Agreement was finalized.

For example, Bersin submitted draw requests on October 19, 2007. Bersin had to follow up on

October 22, November 1, November 2, and November 5, 2007. Nomura’s response was that



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Centerline, the servicer, was reviewing the request. Centerline finally confirmed that payment

was being sent on November 5, almost three weeks after payment was requested. Similarly,

Bersin submitted a funding request on December 21, 2007, but then had to follow up on January

7, 2008 and again on January 11, 2008 (even after being promised payment on January 9), before

payment was eventually made by Nomura.

46. The multiple funding delays created serious financial difficulties for Bersin,

which relied on funding from Nomura to pay contractors, utilities, payroll, rent, lodging, and

dozens of other expenses related to redeveloping Medley Centre. The payment delays put stress

on Bersin’s cashflow and business operations. For example, in May 2008 Nomura’s payment

delays threatened to disrupt Bersin’s purchase of property for Medley Centre from a third party.

Bersin had to urgently ask Centerline to assure the third-party’s attorney that Nomura would be

providing funding for the transaction on time.

47. Nomura’s explanations for its funding delays became increasingly unreasonable,

too. In March 2008 a Nomura representative told Mr. Congel, “We have received internal

approval for the draw request, however the assets were transferred to a Japanese entity and they

are working through funding logistics. I hope to be able to get you funds tomorrow, but can not

[sic] guarantee that will be the case. Please make any necessary back-up provisions as may be

necessary in case we can not make the funding in your necessary time constraints.”

48. Nomura in fact conceded that its management was having cold feet about

continuing to fund the loan, telling Bersin in March 2008 that Nomura was “running into issues

on approval consensus” within the bank for funding the draw requests. In response, a Bersin

representative told his colleagues, “Don’t know what the issue is—we’ve done everything from

our part.” His colleague agreed, writing “that sounds like the crazy [financial] market is putting



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pressure on them.” In June 2008, Nomura told Bersin that it was “completing an analysis” prior

to funding a draw request, without specifying the nature of the purported analysis. In July 2008,

Centerline told Bersin that draw requests would be considered only after evaluating revised Loan

allocation information from Bersin, with no assurance that draw requests would be honored

pursuant to the Loan Agreement’s terms.

49. As Centerline and Nomura became less willing to honor Bersin’s funding

requests, they made increasingly burdensome demands for supporting information. For example,

on April 10, 2008, Nomura asked Bersin to provide (i) a timeline associated with Bersin’s

construction schedule; (ii) a signed lease for Regal Theater; (iii) a package of credentials for a

contractor; (iv) a leasing status and project analysis; (v) the HVS hotel feasibility study that

Bersin commissioned; (vi) hotel cashflow budgets for the next five years; and (vii) a detailed

leasing schedule showing the status of each lease. Soon after, Nomura followed up to demand

(viii) a formal appraisal of the Medley Centre property, (ix) a further updated leasing schedule,

(x) more information about the PILOT loan, (xi) a loan reallocation schedule, (xii) residential

cashflow projections, and (xiii) extensive information about land acquisitions. The Loan

Agreement did not call for this amount of proof before approving funding.

50. Faced with burdensome and unreasonable documentation demands, in each case

Bersin responded promptly with exhaustively thorough information about Medley Centre’s status

and financial needs. In each instance, Bersin sought to remove all impediments to funding

approval, since Bersin was critically dependent on Nomura. For example, in early September

2008, Bersin provided Nomura a comprehensive memorandum entitled “Project Overview and

Accomplishments,” which documented Bersin’s progress with leasing the mall, described the

architectural design process with Jerde Partnership and other contractors, and described Bersin’s



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marketing analyses. Soon after, Bersin provided additional financial data including invoices, a

leasing analysis, profit and loss variance reports, and other spreadsheets. On September 9, 2008,

Bersin provided Centerline a memorandum with extensive detail on several topics that Centerline

asked about in the three prior draw requests. And on September 15, 2008, Bersin provided a

memorandum that detailed why each line item for which it was seeking reimbursement “is

appropriate and beneficial for the overall project.” In this memo, Bersin pointedly noted the bad-

faith approach taken by Centerline at the direction of Nomura to Bersin’s funding requests: “Our

sense is that Centerline is searching [for] ways to reject a line item. We would prefer if our

advocate’s focus was on finding avenues to approve a given line item.”

51. Bersin bent over backwards to satisfy all of Nomura and Centerline’s demands, to

ensure the funding requests were granted. In a typical exchange, Bersin asked Nomura in March

2008 for a call to discuss “what additional info you may need as it is my understanding we have

provided everything that has been requested to date. If there is anything missing, or if there is

something else you require, I want to make sure we get it to you asap.” In another case, in June

2008, Centerline asked Bersin to send an operating statement and rent-roll information. Bersin

responded right away, noting that “we have been sending the operating [profit and loss

statements] on a monthly basis and you should have one,” but agreed to send it again.

Ultimately, though, Bersin’s best efforts to satisfy Nomura’s documentation demands could not

overcome Nomura’s bad-faith desire to terminate the Loan. Nomura went from delaying

payments, to demanding additional documentation, to outright refusal to abide by its contractual

obligations to lend, as detailed below.

2. Nomura’s Improper Refusal To Fund Draw Requests

52. Nomura’s refusal to fund the Loan began to reach a head in January 2009—by

which point Nomura had funded only $44 million of the $135 million Loan—when the bank



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(acting through its servicer, Centerline) refused to pay $629,000 from outstanding draw requests

that Bersin made in November and December 2008. In fact, Nomura refused to pay even after

Centerline evaluated the request and concluded that “everything is within the budget,” and asked

Nomura for funding approval.9

53. In February 2009, and prior to the Loan maturing under its initial term, Bersin

made a further draw request of $54,024,326. This amount included funds for operating costs and

consultants, but the vast majority of the amount requested was for purchasing land and

construction costs for renovating the mall. Nomura balked, evidently unwilling or unable to

satisfy the funding request, by summarily denying the request the next day without explanation

or request for any additional information. After Nomura rejected the request, Bersin, in a last-

ditch effort to save the project, requested an interim partial draw request of $2,816,032,

representing a small portion of the $54 million request, which Nomura again refused.

54. Under the express terms of the Loan Agreement, Nomura was required to fund

Bersin’s draw requests. Section 2.1.1 states that “Subject to and upon the terms and conditions

set forth herein, Lender shall make the Loan Advances … during the period from the date hereof

to the Maturity Date, in accordance with the provisions hereof, and Borrower shall accept the

Loan Advances in an aggregate principal amount of up to One Hundred Thirty Five Million and

No/100 Dollars ($135,000,000.00).” Each of Bersin’s draw requests, including the denied

requests, met the requirements for funding under the Loan Agreement, and Bersin complied with

every request by Centerline and Nomura—reasonable or not—for additional information related

to the draw requests. Nomura’s unjustified failure to fund the 2008 and 2009 draws for

$629,000, $54 million, and $2.8 million constituted multiple breaches of the Loan Agreement.

9 CIII-MEDLEY00001533.



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55. Bersin’s draw requests were reasonable and within the approved scope of the

project. Bersin kept Nomura continually updated on its plans and development progress, with

regular reports, budgets, and construction timelines. In an April 2008 internal memorandum,

Nomura favorably wrote that “the project [would] create a unique first class lifestyle center

comprised of an entertainment complex, hotels, residential, and office.” The Nomura

memorandum noted that Bersin had engaged the Jerde Partnership architectural firm to design

the project; the same firm, Nomura noted, has also designed the Bellagio Hotel in Las Vegas and

other landmarks.10 A later Nomura memorandum from December 2008 described Medley

Centre as a unique opportunity to participate in “one of a few, or possibly only, lifestyle centers

under expansion or construction in the country.”11

56. Had Nomura funded Bersin’s draw requests—as it was contractually obligated

to—Medley Centre would have been a success. In total, Bersin requested nearly $100 million

from Nomura for acquisition and redevelopment of Medley Centre. Had Nomura paid these

funds in a timely manner (as it was required to), Bersin would have had sufficient capital to

renovate the existing Medley Centre mall and then continue expanding it into a premier mixed-

use development. The cashflow generated by the mall, together with funds received from the

PILOT credit facility, would have been more than adequate to permit Bersin to pay off the Loan

to Nomura and expand Medley Centre. Instead, the project was destroyed because of Nomura’s

breach of the Loan Agreement.

3. Nomura’s Improper Refusal To Extend The Loan

57. In addition to refusing to fund draw requests on multiple occasions prior to the

Loan’s initial maturity date, and thereby breaching the Loan Agreement, Nomura also

10 NOMURA-MEDLEY00022055.11 NOMURA-MEDLEY00017429.



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improperly failed to honor Bersin’s extension of the Loan’s term. Section 2.8 of the Loan

Agreement permitted Bersin to extend the duration of the Loan in its sole discretion, for up to

three successive one-year terms, if four requirements were met: (i) Bersin provided timely

notice of its intent to extend the loan (between one month and six months from the initial

maturity date); (ii) no event of default existed at the time of the extension; (iii) Bersin provided

an officer’s certificate containing certain representations and warranties; and (iv) Bersin obtained

a replacement interest rate cap agreement, more than ten business days prior to the maturity date,

in accordance with a formula provided for in the Loan Agreement (which had been prepared by

Nomura).

58. Bersin notified Nomura of its intent to extend the Loan more than three months

prior to expiration, giving the lender more than enough time to cooperate in good faith with

effectuating the extension. During an October 29, 2008 meeting about Medley Centre, Bersin

told Nomura that Bersin planned to extend the Loan and was preparing a notice of extension. In

an internal Nomura memorandum dated December 15, 2008, Nomura noted that Bersin intended

to extend the Loan.12 Then on December 30, 2008, Bersin timely notified Nomura in writing of

Bersin’s intent to extend the loan, stating that Bersin “hereby elects to exercise an Extension

Option to extend the term of the Loan for one (1) year beyond the Initial Maturity Date” of

February 9, 2009. Bersin attached documentation to satisfy the conditions for extension,

pursuant to Section 2.8 of the Loan Agreement, including noting that it would obtain a

replacement interest rate cap agreement. Centerline, in subsequent correspondence with

Nomura, characterized the December 30, 2008 packet from Bersin as “the extension documents

for the Medley Centre Loan.”13

12 Id.13 NOMURA-MEDLEY00025665.



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59. With respect to the replacement interest rate cap agreement, Bersin informed

Nomura on multiple occasions that Bersin required additional information from Nomura in order

to obtain the agreement (specifically, the strike price and the notional amount, which are both

discussed below). However, Nomura did not respond to Bersin’s notification for more than a

month, not until February 6, 2009, three days prior to the Loan’s expiration. Although the Loan

Agreement stated that Bersin was required to obtain a replacement interest rate cap agreement at

least ten business days prior to the February 9, 2009 initial maturity date, Nomura ignored

Bersin’s repeated requests for information necessary to fulfill that provision. In fact, by the time

Nomura responded, on February 6, 2009, the deadline to obtain a replacement interest rate cap

agreement had already expired.

60. On February 6, 2009, Nomura confirmed by letter that Bersin had provided timely

notice of its “election to extend the Maturity Date of the Loan,” subject to the satisfaction of the

remaining requirements of Section 2.8 of the Loan Agreement. Nomura further confirmed that

Bersin had provided the required officer’s certificate, and the bank did not claim that any event

of default existed. To the contrary, Nomura included a draft “Loan Extension Agreement” with

its February 6, 2009 letter and confirmed that it expected the Loan Agreement to be extended.

61. Nomura’s February 6, 2009 letter did not provide the information Bersin was

waiting on in order to extend the Loan. With respect to the fourth condition associated with

extending the term of the Loan, obtaining a replacement interest rate cap agreement, Nomura’s

letter was silent on the notional amount and strike rate for the agreement, despite Bersin’s

repeated requests for that information. Nomura subsequently breached the Loan Agreement

before Bersin could obtain such an agreement.



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62. The purpose of the interest rate cap agreement, in the context of the Loan (which

was a floating-rate loan tied to LIBOR), was to ensure that, in the event interest rates rose above

a pre-determined threshold (called a “strike price”), Bersin could still make timely payments to

Nomura. In effect, the interest rate cap agreement would convert Bersin’s floating rate loan to a

fixed rate loan at the strike price, to the extent interest rates rose above the strike price.

Accordingly, the lower the strike price, the more likely that the rate cap agreement will be

triggered, and therefore the more expensive the rate cap agreement would be for Bersin to obtain.

Conversely, the higher the strike price, the less likely the rate cap agreement is to be triggered,

and the less expensive the rate cap agreement would be to obtain. In pricing an interest rate cap

agreement, the two key inputs are therefore (a) the strike price (i.e., the threshold at which the

interest rate cap payment obligations by the insurance provider are triggered), and (b) the

notional amount (i.e., the amount of principal for which the interest rate insurance is being

purchased).

63. Bersin spoke with Nomura’s servicer, Centerline, multiple times about the interest

rate cap agreement, beginning well before the Loan Agreement matured, to determine whether a

cap agreement would be required by Nomura and if so, under what terms. These

communications occurred on January 6, January 20, January 28, and February 6, 2009, at a

minimum. For example, on January 6, 2009, Bersin discussed with Centerline the minimum

credit rating for the interest rate cap agreement provider that was required by the Loan

Agreement. Centerline acknowledged that the rating requirement “may be a problem” and may

“lead to needlessly higher cap pricing.” Centerline promised to look into it, though subsequent



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communications between Centerline and Nomura show that the ratings issue was still

outstanding as of February 9, 2009, the day the Loan matured.14

64. On January 28, 2009, Bersin asked Centerline to “confirm[] the strike rate on the

cap” and review language required by the proposed interest rate cap provider, warning that

Bersin’s broker knew of only one suitable counterparty. Bersin added that “A quick response is

appreciated to insure we can put the cap in place and document the cap properly and timely.”

Then on February 6, 2009, Bersin asked Nomura by email to “confirm whether the lender

requires an interest rate cap at this time. If required, please provide the relevant information such

as the notional amount and the strike rate.” Nomura did not respond to these requests until

February 9, 2009, and even then, it responded incompletely.

65. Given Nomura’s lack of response prior to the maturity date, it was unclear to

Bersin whether Nomura required the interest rate cap agreement at all and if so, what terms

Nomura would require. Bersin made multiple requests for information during this period that

went unanswered, despite emphasizing the need for a prompt response from Nomura. Lacking

key information such as the notional amount and strike price prevented Bersin from obtaining a

replacement cap agreement.

66. Centerline and Nomura were well aware of the upcoming February 9, 2009

deadline to extend the loan, as reflected in their internal emails. For example, on January 12,

2009, a Centerline employee asked another employee to “please call me to discuss the extension

of the initial loan maturity coming up on Feb 9th.”15 Internal emails show that Nomura and

Centerline discussed Bersin’s requests for information about the interest rate cap agreement

14 NOMURA-MEDLEY00001176.15 CIII-MEDLEY00001533.



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internally, yet failed to provide the necessary information to Bersin.16 Subsequent

correspondence within Nomura and between Nomura and Centerline shows that Nomura failed

to address the Loan extension until the last minute, in the final days leading up to the February 9,

2009 deadline.17 Even then, when Nomura finally did address the rate cap issue, it did so in an

incomplete manner. Bersin knows of no good-faith reason for Nomura’s egregious delays and

failure to provide the requested and necessary information.

67. On the morning of February 9, 2009—the day the Loan was scheduled to

mature—Yoshikazu Okano, a senior Nomura executive who was closely involved in the bank’s

internal discussions about extending the Loan, finally calculated the Loan’s notional amount,

information Bersin had repeatedly requested: “The current loan balance is $43,466,151.25 and

we advance $205,056 which should be the final advance. So, the notional amount will be

$43,500,000.”18 This was apparently the first time anyone at Nomura had calculated the notional

amount, despite multiple discussions with Bersin about the terms of the rate cap agreement.

68. That morning, Mr. Okano also told his colleagues that the bank would require a

strike price set at current LIBOR, even as Mr. Okano conceded that such a strike price would be

“pretty expensive now.”19 Setting the strike price at current LIBOR was highly unreasonable, in

effect mandating that Bersin purchase insurance against the possibility that already very low

LIBOR rates would not rise at all. Obtaining insurance at that strike price would have been

extremely expensive and difficult to obtain, particularly on short notice.

69. Following the February 9, 2009 discussions among Nomura and Centerline about

the strike price, Nomura instructed Centerline to tell Bersin that Nomura required the strike price

16 NOMURA-MEDLEY00000791.17 NOMURA-MEDLEY00001176.18 NOMURA-MEDLEY00000791.19 NOMURA-MEDLEY00001176.



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for the replacement interest rate cap agreement to be “current 1 month LIBOR.”20 However, this

demand was not sent to Bersin until 10:13 a.m. on February 9, 2009, the same day that the Loan

matured and almost six weeks after Bersin formally notified Nomura of its intent to extend the

Loan Agreement. Moreover, the deadline for Bersin to obtain a replacement agreement, which

was ten business days prior to the maturity date, had by then already passed. Nomura waived

that requirement by its actions, but regardless, Nomura’s eleventh-hour response to Bersin made

it effectively impossible for Bersin to obtain a replacement cap agreement prior to the Loan

maturing, that same day. Given Nomura’s lack of response to repeated requests for information

related to the rate cap agreement, Bersin was forced to conclude, prior to the Loan’s maturity

date, that Nomura was unwilling to provide the information required for Bersin to obtain a new

agreement and had effectively waived any such requirement.

70. Nomura’s demand to set the strike price at “current 1 month LIBOR” was

unreasonable for other reasons, as well. For example, the strike price is defined in the Loan

Agreement as the ratio of certain cashflows to the outstanding principal balance of the Loan,

which is then divided by 1.05, less a constant term. There is no reading of the Loan Agreement

provisions governing the calculation of the strike price that could possibly result in a strike price

set at LIBOR.

71. Centerline and Nomura privately conceded this in a February 6, 2009 e-mail in

which a Centerline employee involved with the Medley Centre Loan told Nomura executive Mr.

Okano that the calculation of the strike price under the Loan Agreement was “conflicting and not

clear in the loan document,”21 notwithstanding that Nomura was the author of the Loan

20 NOMURA-MEDLEY00000813. 21 NOMURA-MEDLEY 00000791.



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Agreement. Nomura never disclosed to Bersin its own concession that the Loan Agreement’s

interest rate cap provision was flawed.

72. In any event, to the extent one could guess at a reasonable interpretation for the

undefined terms in the strike price provision, the resulting strike price would have been at least 5

percent—far in excess of the LIBOR rate Nomura demanded, which was 0.4 percent as of

February 2009. As noted above, the lower the strike price, the more likely it would be that the

rate cap agreement would be triggered, and therefore the more expensive the rate cap agreement

would have been to obtain. A strike price set at LIBOR was an unreasonable and uneconomic

demand by Nomura.

73. Moreover, although Nomura did finally provide a strike price for the interest rate

cap agreement, albeit on the day the Loan Agreement expired, Nomura never provided the

notional amount for the interest rate cap agreement (i.e., the amount of principal that would be

subject to the rate cap agreement). Bersin had to wait to obtain an interest rate cap agreement

until it had certainty from Nomura on the notional amount and strike price of the cap agreement.

At the time Nomura denied Bersin’s final draw requests, Bersin was still waiting for Nomura to

provide the notional amount to use for the replacement cap agreement. It was unreasonable for

Nomura to expect Bersin to purchase a policy when the notional amount was unspecified, and

where only Nomura had access to that information.

74. Although the Centerline representative who corresponded with Bersin told

Nomura late in the evening on February 9, 2009 that he had informed Bersin of the strike rate

and notional amount for the cap agreement,22 that was untrue. In fact, neither Centerline nor

Nomura ever told Bersin the notional amount of the loan for purposes of obtaining the




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replacement cap agreement. Bersin could not obtain a replacement cap agreement because

Nomura and Centerline failed to supply this critical information.

75. In addition, Nomura stated on February 6, 2009 that Bersin had until February 20,

2009 to obtain a replacement interest rate cap agreement. However, Nomura denied Bersin’s

$54 million draw request without justification on February 10, 2009—thereby (again) breaching

the Loan Agreement—even though the term of the Loan had already been provisionally

extended, and Bersin had another six days in which to obtain a new cap agreement.

76. Further, the Loan Agreement made clear that any purported requirement that

Bersin obtain a replacement interest rate cap agreement was merely ministerial and should not be

the basis for denying an extension of the Loan. Section 2.2.7(d) permitted Nomura to obtain a

replacement agreement itself and to charge Bersin for the cost. Nomura failed to obtain a

replacement agreement itself for the same reason it failed to provide the necessary information

for Bersin to obtain a replacement agreement: Nomura wished to be relieved of its funding

obligations under the Loan.

77. Finally, to the extent Nomura claims that it was entitled to treat the Loan as not

extended because Bersin did not return Nomura’s purported “Loan Extension Agreement,”

Bersin was under no obligation to complete a new loan agreement, as the extension provision of

the 2007 Loan Agreement was self-executing. There was no need to complete a new agreement

to confirm the extension of the Loan.

E. Nomura Continued To Breach The Loan Agreement Even After It Was Extended.

78. As noted above, Bersin made its draw request for $54 million (as well as the

earlier draw requests) in a timely manner, prior to the expiration of the Loan’s initial maturity

date. Because the Loan had been extended, the principal was not due to be repaid until February



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9, 2010. Nomura breached the Loan Agreement by summarily denying Bersin’s multiple draw

requests and by failing to honor Bersin’s extension of the Loan’s term.

79. In fact, in later correspondence with Bersin, Centerline confirmed on Nomura’s

behalf that the Loan had been extended, and on March 9, 2009—and again on March 17, 2009—

Centerline expressly requested that Bersin make certain shortfall payments, a request that could

only have been appropriate if the Loan had, in fact, been extended. Even after sending Bersin a

maturity notice on March 18, 2009, Centerline continued to send Bersin e-mails indicating that

they were expecting monthly interest payments.

80. In an effort to avert the damage Nomura has caused to Medley Centre, Bersin

made a February 13, 2009 “interim draw request” for $2.8 million, which was a subset of the

earlier February 9, 2009 draw request for $54 million that was denied. The interim request was a

good-faith attempt by Bersin to permit Nomura to make good on its obligations and cure its

breach with an interim payment for critical operational costs, such as payroll and utilities. Even

though Nomura was given the opportunity to partly cure its earlier breach, it repeatedly refused.

81. In addition, Section 2.1.9(c) of the Loan Agreement permitted Bersin upon

extending the Loan to “present[] Lender with a properly prepared Advance Request for a single

Loan Advance (for construction that has been commenced but not then completed due to the

occurrence of a force majeur[e] event).” Bersin therefore remained authorized to make a further

draw against the Loan from the approximately $35 million still undrawn on the Loan, because it

would relate to “construction that has been commenced but not then completed due to the

occurrence of a force majeur[e] event.”

82. Here, the relevant construction had not been completed because Nomura had

failed to provide sufficient advances to permit the timely construction of Medley Centre. A force



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majeure event therefore existed as of February 9, 2009 due to Nomura’s failure to provide

adequate funding (something beyond Bersin’s control). Bersin, however, was denied access to

the additional force majeure funds because on March 18, 2009, Centerline stated to Bersin, on

Nomura’s behalf, that the Loan had matured and was due. By declaring the Loan matured

(notwithstanding that it had been properly extended to February 9, 2010), by refusing to fund the

pending draw requests, and by foreclosing a future force majeure request, Nomura repeatedly

breached the Loan Agreement.

83. In addition, the extension of the Loan also extended the period in which Bersin

could make draw requests without regard to a force majeure event. Although Section 2.1.9(c) of

the Loan Agreement refers to Bersin submitting a request to Nomura for a final advance to

complete construction that was impeded by a force majeure event, Section 2.1.9(c) is

inconsistent with an earlier provision of the Loan Agreement that provides that Nomura was

required to make Loan advances up to $135 million through the “Maturity Date,” which is a

defined term meaning “the Initial Maturity Date or, if applicable, the Extended Maturity Date, or

such other date on which the final payment of principal of the Notes becomes due and payable as

therein or herein provided.” Accordingly, per Section 2.1, Bersin was permitted to make draw

requests beyond the initial February 9, 2009 maturity date, and through the extended February 9,

2010 extended maturity date.

F. Nomura Acted In Its Own Financial Interests And To The Detriment of Bersin And Economic Stakeholders In Medley Centre.

84. Nomura’s reluctance to fund the Loan was driven by its own selfish economic

interests in light of changed economic circumstances. A Nomura executive in October 2007 told

Bersin that the Nomura team involved with the Medley Centre Loan was “under greater scrutiny

due to market conditions.” In an even more alarming conversation, two Nomura employees



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working on Medley Centre told Bersin in February 2008 that Bersin “would not be able, most

likely, to receive further funding after this year [2008].” That, of course, is contrary to the Loan

Agreement, which permitted Bersin to issue draw requests through the February 2009 maturity

date of the Loan, and to extend the Loan for three one-year periods, until 2012. Yet only a year

after the Loan Agreement was finalized, and almost a year prior to its initial maturity date,

Nomura already expected to stop funding draw requests, contrary to the Loan Agreement. This

is a stunning admission.

85. Nomura also told Bersin in February 2008 that “this is a lenders[’] market, not a

borrowers[’] market, and we will be coming to a material renegotiation of the terms of this

loan—there is not a lot of liquidity out there.” This single sentence is likewise incredibly telling,

since none of those points is a proper justification for Nomura’s breach. Nomura remained

obligated to Bersin under the Loan Agreement. But rather than honoring the agreement, Nomura

chose instead to breach it.

86. Similarly, in December 2008, a senior Nomura representative sent the following

question to Centerline: “I understood that the borrower has the right to request the advance until

February 9, 2009 as long as the borrower satisfies the conditions. Am I missing anything or do

we have any discretion on this matter?”23 Here, too, it is clear the bank was looking for a way

out of its commitment to Bersin.

87. Nomura’s bad-faith breaches of its contractual duties were orchestrated by

employees of Nomura Holdings, Inc. and Nomura Holding America Inc. (its principal North

American subsidiary), including the Chief Legal Officer of Nomura Holding America Inc.,

David Findlay, who was closely involved in discussions about the extension of the Loan. The




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presence of Mr. Findlay at the center of Nomura’s improper conduct is no surprise. Mr. Findlay

has previously been found liable by a federal judge for violating federal securities laws based on

his role in the securitization and sale of residential mortgage-backed securities to U.S.

government-sponsored enterprises Fannie Mae and Freddie Mac.

88. With respect to Mr. Findlay, Judge Denise Cote of the Southern District of New

York found that “In short, if there was one Individual Defendant most responsible for the poor

design and execution of Nomura’s due diligence processes and the creation of misleading

Offering Documents, it was Findlay.” Fed. Housing Fin. Agency v. Nomura Holding Am., Inc.,

104 F. Supp. 3d 441, 547 (S.D.N.Y. 2015), aff’d, 873 F.3d 85 (2d Cir. 2017). Judge Cote also

concluded that Mr. Findlay’s testimony “may be false,” in which case “not only did he commit

perjury, but he had good reason to know of the problems in Nomura’s RMBS business, yet took

no action to solve them,” or his testimony “may be true, in which case Findlay was so detached

from his professional responsibilities as to effectively render him a figurehead.” Id. at 549

n.160. Mr. Findlay and his Nomura colleagues displayed the same disregard of their

responsibilities and bad faith in their treatment of Bersin, as they did to Fannie Mae and Freddie

Mac.

89. In fact, in its later public filings, Nomura conceded that it had undertaken a

calculated effort to shore up its balance sheet against RMBS losses directly caused by Mr.

Findlay and his colleagues. Nomura did so at the expense of its existing commercial lending

commitments to Bersin and others, however. In pursuing its own macroeconomic strategies,

Nomura sacrificed Bersin as its business partner, thereby breaching the Loan Agreement and

Nomura’s implied covenant of good faith and fair dealing with Bersin.

90. For example, in its 2009 Annual Report, Nomura stated that:



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Net revenue for the year was ¥312.6 billion. We booked a pretax loss of ¥779 billion and a net loss of ¥708.2 billion. While this represents our worst financial result ever, it also reflects our determination to deal aggressively with negative positions in legacy assets and align the company for future growth.

In dealing with these troubled assets, we reassessed the parts of our business that were not fully focused on clients. We were quick to review, reduce, and exit non-client businesses and illiquid positions such as commercial mortgages. As a result, we have emerged from the financial crisis with one of the cleanest balance sheets among global players.

Letter from Kenichi Watanabe, Nomura President & Chief Executive Officer, 2009 Annual

Report of Nomura Holdings, Inc., at 8–9 (emphasis added). Nomura’s unwillingness to fund its

commitment to Medley Centre was part-and-parcel with its efforts to exit “negative positions in

legacy assets” in the commercial lending business “and align the company for future growth.”

Nomura may have concluded, wrongly, that Medley Centre would be affected by the financial

crisis, and therefore wished to exit even if it meant acting in bad faith and breaching the Loan

Agreement.

91. Nomura’s Deputy President and Chief Operating Officer, Takumi Shibata, echoed

those sentiments:

Q4 What is your strategy with regard to illiquid assets and businesses that require a long–term investment horizon?

Many of our writedowns and losses in FY 2008 were related to illiquid assets such as private equity investments and real estate, as well as long–term investments …. We have decided to curb new investments in assets that are illiquid or require a longer holding period.

Interview with the COO, 2009 Annual Report of Nomura Holdings, Inc., at 15. Medley Centre

was among the company’s investments in illiquid assets, like real estate, that Nomura was

concerned about and wanted to reduce its exposure to, based on the bank’s own strategic

decisions in light of the financial crisis. Nomura evidently wanted to free up cash for other

purposes by withdrawing from commitments such as the Loan, seeking to shore up the



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company’s cashflow in light of its enormous losses in RMBS and other business sectors during

the financial crisis.

92. Nomura’s Chief Financial Officer, Masafumi Nakada, went even further—

likening the global financial turmoil to an “opportunity” for Nomura to dispose of legacy assets

(at the expense of its contractual counterparties, like Bersin):

During the past year, we did more than just keep our head down to weather the financial storm. We saw the crisis as an opportunity to position Nomura for future growth, so we enhanced our capabilities, financial position and capital structure.

We started by disposing of legacy assets to clean up our balance sheet. While we have always marked our assets to market prices for transparency, the financial market turmoil made it difficult to see market prices for some assets. We made conservative reductions and writedowns on illiquid assets, and booked a significant loss in fiscal 2008.

Message from the CFO, 2009 Annual Report of Nomura Holdings, Inc., at 18 (emphasis added).

Again, the Medley Centre loan was evidently considered an “illiquid asset” that Nomura

“dispos[ed]” of to “clean up [its] balance sheet,” at the great expense of Bersin and the

community, and contrary to Nomura’s contractual obligations and implied covenant of good

faith and fair dealing.

93. At the time of Nomura’s breach of the Loan Agreement, it was doubtless aware

that the economic recession would make it nearly impossible for Bersin to secure replacement

financing to substitute for the $135 million Loan. Moreover, Nomura rejected Bersin’s attempt

to find alternative funding to save the project, as Nomura refused to subordinate its position for

another lender to step in. Bersin urgently warned Nomura that despite spending “a tremendous

amount of time engaging the financing community” to replace Nomura as lender, Bersin had

been unable to find a replacement, and Medley Centre was in a “downward spiral.” Nomura



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took no steps to mitigate the harm it had caused Medley Centre, Bersin, public stakeholders, and

the broader community.

94. In addition to the above evidence that Nomura was looking for an excuse to avoid

its funding obligations under the Loan Agreement due to financial pressures, the documents

produced to date by Nomura and Centerline in response to Bersin’s discovery demands show that

Nomura had no legitimate basis for refusing to fund Bersin’s draw requests. In fact, even though

Nomura has now completed its primary production of documents, as well as a supplemental

document production, there is a striking absence in the productions by Nomura and Centerline of

any documents explaining their basis for denying Bersin’s multiple draw requests. The absence

of such documents is a significant cause for concern, as it appears that Nomura denied Bersin’s

funding requests with little or no analysis.

G. Bersin, The Local Community, And The Affected Tax Jurisdictions Were HarmedBy Nomura’s Misconduct.

95. As a direct and foreseeable consequence of (i) Nomura’s delays and refusals to

fund multiple draw requests by Bersin; (ii) Nomura’s refusal to provide timely and commercially

reasonable information necessary for Bersin to obtain a replacement interest rate cap agreement;

(iii) Nomura’s failure to obtain a replacement interest rate cap agreement itself, or to further

assist Bersin in obtaining one; (v) Nomura’s refusal to honor Bersin’s extension of the Loan;

(vi) Nomura’s false declaration that the Loan had matured and an event of default had occurred;

and (vii) Nomura’s decision to favor its own economic interests over its obligations to Bersin

and Medley Centre, Nomura breached the terms of the Loan Agreement and its duties to Bersin.

96. Nomura’s misconduct predictably devastated Medley Centre and damaged Bersin

by robbing the project of the financing it needed to survive. Once the bank’s funding dried up,

Medley Centre could not move forward, since Bersin was unable to obtain replacement



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financing. Medley Centre never achieved its potential, and was sold at a sheriff’s sale several

years later. Both Bersin and the local community have been enormously harmed as a result of

Nomura’s wrongdoing.

FIRST CAUSE OF ACTION(Breach Of The Loan Agreement And

Breach Of The Loan Agreement By Anticipatory Repudiation)

97. Bersin repeats and realleges each allegation above as if fully set forth herein,

except that Bersin expressly excludes from this cause of action any allegation that could be

construed as alleging fraud or intentional or reckless conduct.

98. This is a claim for breach of the Loan Agreement, and breach by anticipatory

repudiation, against both Defendants.

99. The Loan Agreement is a valid and enforceable contract executed by Bersin and

Nomura Credit, and purportedly assigned to NCCMI, pursuant to which Nomura agreed to

provide $135 million in funding to Bersin.

100. Defendants materially breached the Loan Agreement, at a minimum, by (i) failing

to fund all draw requests, including the refusal to fund $629,000 in January 2009, refusing

Bersin’s $54 million draw request of February 9, 2009, and refusing Bersin’s $2.8 million

revised interim draw request of February 13, 2009; (ii) failing to extend the Loan Agreement or

acknowledge Bersin’s extension of the Loan Agreement; and (iii) falsely declaring that the Loan

had matured and an event of default had occurred.

101. Bersin complied with all of its applicable obligations under the Loan Agreement.

At the time of Nomura’s breach, Bersin had performed all obligations that it was required to

perform, except to the extent that Nomura’s conduct prevented Bersin from doing so.



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102. Nomura’s breaches caused enormous losses to Bersin due to loss of equity,

profits, and residual development value in Medley Centre, as well as significant harm to public

stakeholders. As a result of the foregoing breaches, Bersin is entitled to compensatory and

punitive damages in an amount to be proven at trial.

SECOND CAUSE OF ACTION(Breach Of The Implied Covenant Of Good Faith And Fair Dealing)

103. Bersin repeats and realleges each allegation above as if fully set forth herein,

except that Bersin expressly excludes from this cause of action any allegation that could be

construed as alleging fraud or intentional or reckless conduct. Bersin also expressly excludes

from this cause of action any allegation that could be construed as a breach of contract.

Defendants’ implied covenant of good faith and fair dealing is a separate legal obligation, arising

from distinct extra-contractual facts.

104. This is a claim for breach of the implied covenant of good faith and fair dealing

against both Defendants.

105. The parties’ Loan Agreement contained an implied covenant of good faith and

fair dealing which imposed implied duties upon Nomura to Bersin. The covenant required,

among other things, that Nomura not deprive Bersin of the benefits of the Loan Agreement,

thereby frustrating Bersin’s rights and reasonable expectations under the agreement. The

implied covenant also required Nomura not to engage in acts of bad faith and not to act

unreasonably. The implied covenant claim is based on Bersin’s implicit right to receive the

benefit of the Loan Agreement, which required Nomura to act in good faith.

106. Nomura’s actions were in bad faith and breached its implied covenant of good

faith and fair dealing by impairing Bersin’s rights under the Loan Agreement and frustrating the

parties’ intent and the Loan Agreement’s purpose. These wrongful acts include, at a minimum,



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(i) Nomura’s delays in funding multiple draw requests, and demands for unreasonably

burdensome and duplicative documentation from Bersin prior to funding such requests, which

interfered with Bersin’s normal business operations, negatively affected Medley Centre’s

development, and harmed Bersin’s credibility with third parties (this failure is separate from, and

does not include, Nomura’s failure to fund the January 2009 draw request for $629,000 and the

February 2009 draw requests for $54 million and $2.8 million, which constitute breaches of the

Loan Agreement); (ii) Nomura’s failure to provide information necessary for Bersin to obtain a

replacement interest rate cap agreement in a timely manner, prior to the Loan’s initial maturity

date; (iii) Nomura’s demand to Bersin of an unreasonable and unsupported strike price for the

replacement interest rate cap agreement; (iv) Nomura’s failure to obtain a replacement interest

rate cap agreement itself, or to further assist Bersin in obtaining such an agreement, to avoid the

Loan defaulting; and (v) Nomura’s decision to favor its own economic interests and strategic

priorities, in light of unfavorable economic conditions, by not adhering to its obligations under

the Loan.

107. Nomura’s breaches of its covenant of good faith and fair dealing caused enormous

losses to Bersin, from loss of equity, profits, and residual development value in Medley Centre,

as well as significant harm to public stakeholders. As a result of the foregoing breaches, Bersin

is entitled to compensatory and punitive damages in an amount to be proven at trial.

PRAYER FOR RELIEF

WHEREFORE, Bersin requests that this Court:

(a) Award Bersin a judgment against Defendants, jointly and severally, for

compensatory and punitive damages in an amount to be proven at trial, but no less than $600

million, plus interest thereon at the statutory rate.

(b) Award Bersin costs, disbursements, and attorneys’ fees of this action; and



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(c) Award such other and further relief as the Court deems proper.

Dated: New York, New YorkNovember 14, 2017

QUINN EMANUEL URQUHART & SULLIVAN, LLP

By: /s/ Philippe Z. SelendyPhilippe Z. SelendyJordan A. GoldsteinDavid D. Burnett

51 Madison Avenue, 22nd Floor New York, NY 10010 Tel: (212) 849-7000Fax: (212) 212-849-7100

Attorneys for Plaintiff Bersin Properties, LLC



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