Blackstone cairo causa solferino

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
BLACKSTONE REAL ESTATE ADVISORS
L.P.,
BLACKSTONE REAL ESTATE PARTNERS
EUROPE IV-NQ L.P.,
BLACKSTONE REAL ESTATE HOLDINGS
EUROPE IV-NQ ESC L.P.,
BLACKSTONE FAMILY REAL ESTATE
PARTNERSHIP EUROPE IV SMD L.P.,
(OFFSHORE) VII-NQ L.P.,
(OFFSHORE) VII.F-NQ L.P.,
(OFFSHORE) VII.TE.1-8-NQ L.P.,
PARTNERSHIP (OFFSHORE) VII-SMD L.P.,
(OFFSHORE) VII-NQ-ESC L.P.,
EUROPE IV.F-NQ L.P.,
EUROPE IV.2-NQ L.P.,
SFORZA HOLDCO S.À.R.L., and
KRYALOS SGR S.P.A, in its capacity as
management company of DELPHINE FUND,
Plaintiffs,
- against -
URBANO CAIRO,
Defendant.
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SUMMONS
TO THE ABOVE-NAMED DEFENDANT:
YOU ARE HEREBY SUMMONED to answer the Complaint in this action and to serve
a copy of your Answer on Plaintiffs’ attorneys within twenty (20) days after the service of this
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NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 05/01/2019
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Summons, exclusive of the date of service (or within thirty (30) days after the service is complete
if this Summons is not personally delivered to you within the State of New York); and in case of
your failure to appear or answer, judgment will be taken against you by default for the relief
demanded therein.
New York County is designated as the place of trial pursuant to CPLR § 503.
Dated: New York, New York
April 22, 2019
TO:
Urbano Cairo
Via Tamburini Pietro 10
20123 Milano, Italy
Respectfully submitted,
/s/ Lamina Bowen
____________________
Lamina Bowen
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Email: lamina.bowen@kirkland.com
Counsel to Plaintiffs Blackstone Real Estate
Advisors L.P., Blackstone Real Estate Partners
Europe IV-NQ L.P., Blackstone Real Estate
Holdings Europe IV-NQ ESC L.P., Blackstone
Family Real Estate Partnership Europe IV
SMD L.P., Blackstone Real Estate Partners
(Offshore) VII-NQ L.P., Blackstone Real Estate
Partners (Offshore) VII.F-NQ L.P., Blackstone
Real Estate Partners (Offshore) VII.TE.1-8-NQ
L.P., Blackstone Family Real Estate
Partnership (Offshore) VII-SMD L.P.,
Blackstone Real Estate Holdings (Offshore)
VII-NQ-ESC L.P., Blackstone Real Estate
Holdings (Offshore) VII-NQ L.P., Blackstone
Real Estate Partners Europe IV.F-NQ L.P.,
Blackstone Real Estate Partners Europe IV.2-
NQ L.P., Sforza Holdco S.à.r.l., and Kryalos
SGR S.p.A, in its capacity as management
company of Delphine Fund
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
BLACKSTONE REAL ESTATE ADVISORS
L.P.,
EUROPE IV-NQ L.P.,
EUROPE IV-NQ ESC L.P.,
PARTNERSHIP EUROPE IV SMD L.P.,
(OFFSHORE) VII.F-NQ L.P.,
(OFFSHORE) VII.TE.1-8-NQ L.P.,
PARTNERSHIP (OFFSHORE) VII-SMD L.P.,
(OFFSHORE) VII-NQ-ESC L.P.,
EUROPE IV.F-NQ L.P.,
EUROPE IV.2-NQ L.P.,
SFORZA HOLDCO S.À.R.L., and
KRYALOS SGR S.P.A, in its capacity as
management company of the DELPHINE
FUND,
Plaintiffs,
- against -
URBANO CAIRO,
Defendant.
INDEX NO.: 652328/2019
COMPLAINT
Plaintiffs Blackstone Real Estate Advisors L.P. (“Blackstone”), Blackstone Real Estate
Partners Europe IV-NQ L.P., Blackstone Real Estate Holdings Europe IV-NQ ESC L.P.,
Blackstone Family Real Estate Partnership Europe IV SMD L.P., Blackstone Real Estate Partners
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(Offshore) VII-NQ L.P., Blackstone Real Estate Partners (Offshore) VII.F-NQ L.P., Blackstone
Real Estate Partners (Offshore) VII.TE.1-8-NQ L.P., Blackstone Family Real Estate Partnership
(Offshore) VII-SMD L.P., Blackstone Real Estate Holdings (Offshore) VII-NQ-ESC L.P.,
Blackstone Real Estate Holdings (Offshore) VII-NQ L.P., Blackstone Real Estate Partners Europe
IV.F-NQ L.P., Blackstone Real Estate Partners Europe IV.2-NQ L.P. (collectively, the
“Blackstone Entities”), Sforza Holdco S.à.r.l. (“Sforza”), and Kryalos SGR S.p.A (“Kryalos”), in
its capacity as management company of the Delphine Fund (“Delphine”; Blackstone, the
Blackstone Entities, Sforza, and Kryalos collectively referred to as “Plaintiffs” or the “Purchasing
Group”) bring the following action seeking monetary relief against Defendant Urbano Cairo and
allege as follows:
NATURE AND SUMMARY OF THE ACTION
1. By this action, Plaintiffs seek redress for Defendant Urbano Cairo’s malicious
interference with Plaintiffs’ nearly completed sale of certain properties to a third party—properties
Plaintiffs purchased more than five years ago from a company, RCS Media Group S.p.A. (“RCS”),
that Mr. Cairo now controls today. Mr. Cairo is the Chairman, Chief Executive Officer and
controlling shareholder of RCS. He took control of RCS in 2016, as the result of a hostile takeover.
2. In 2013, years before Mr. Cairo seized control of RCS, Plaintiffs purchased from
RCS, following a broad and lengthy sales process conducted by RCS and its advisors, certain
commercial buildings in Milan, Italy (the “Properties”), and Plaintiffs leased the Properties back
to RCS (collectively, the “2013 Transaction”). At the time of the 2013 Transaction, Mr. Cairo
owned less than 3% of RCS and was not a member of RCS’s Board of Directors, nor was he part
of management of RCS.
3. Two years after the 2013 Transaction, RCS vacated a majority of the Properties.
Thereafter, Plaintiffs invested substantial funds in renovating and improving the vacated portions
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of the Properties, and, over time and with significant efforts, Plaintiffs attracted new commercial
anchor tenants to bring the Properties to full occupancy.
4. Having substantially increased the value of the Properties over the past five years
(during which period RCS never complained about the 2013 Transaction), Plaintiffs sought in
2018 to sell their interests in the Properties. In this connection, and after a process of several
months, Plaintiffs entered into a letter of interest on June 14, 2018 to sell their interests in the
Properties to a prospective purchaser, Allianz Real Estate GmbH (“Allianz”). Plaintiffs and
Allianz had agreed on all material terms for the sale of Plaintiffs’ interests in the Properties, and,
as of July 2018, Plaintiffs and Allianz were on a path to closing the contemplated sale.
5. Plaintiffs’ contemplated sale of their interests in the Properties to Allianz was
reported in the media on July 10, 2018. Three days later, on July 13, after learning that Plaintiffs
were nearing consummation of a sale of their interests in the Properties, Mr. Cairo claimed for the
first time that the 2013 Transaction is somehow “null and void” and should be unwound, slandering
Plaintiffs’ title to the Properties and interfering with Plaintiffs’ contemplated transaction to sell
their interests in the Properties to Allianz. Following Mr. Cairo’s assertion of these false and
malicious claims, Allianz has indicated that it will not go forward with the transaction unless and
until such claims are withdrawn.
6. Mr. Cairo’s claim that the 2013 Transaction should now be voided and title to the
Properties returned to RCS is malicious and absolutely baseless, and his conduct here is purely
extortive. As Mr. Cairo, a substantial RCS shareholder at the time, well knows, the sales process
for the Properties undertaken in 2013 by RCS’s prior management team was a competitive bidding
contest initiated and conducted by RCS and its legal and financial advisors, wherein RCS solicited
offers from at least 30 real estate investors, including the Blackstone Entities and many other
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investment firms based in New York. Over a period of several months in 2013, RCS received
numerous offers, negotiated increases in proposed purchasing prices (including from Plaintiffs),
and ultimately elected to sell to Plaintiffs because, according to RCS, Plaintiffs presented “the
most attractive bid” that was “substantially in line with the valuation by a leading real estate
advisor.” And, RCS’s sale process for the Properties in 2013 was not only guided by highly
sophisticated financial and legal advisors, but it was actively led by RCS’s experienced and
engaged management team and Board of Directors and was overseen and monitored by the
company’s esteemed Board of Statutory Auditors. The notion that Plaintiffs somehow defrauded
or coerced RCS into selling them the Properties has not even a whisper of factual or legal support.
7. In response to RCS’s and Mr. Cairo’s efforts to extort Plaintiffs, among other
things, Plaintiffs sent a letter on November 8, 2018 to Mr. Cairo and the other RCS board members
demanding that Mr. Cairo disavow his statements challenging the legitimacy of Plaintiffs’ interest
in the Properties. In that November 8th letter, Plaintiffs warned that unless Mr. Cairo’s statements
were immediately disavowed, Plaintiffs would commence an action in New York seeking redress
for this slanderous and extortive conduct. The next day, November 9, 2018, after receiving
Plaintiffs’ letter promising the commencement of a lawsuit in New York, RCS rushed to initiate
an arbitration in Milan against Plaintiff Kryalos, seeking a declaration that the 2013 Transaction
was void. Shortly thereafter, on November 20, 2018, Plaintiffs filed suit against RCS in this Court
seeking redress for RCS’s conduct in maliciously interfering with Plaintiffs’ nearly contemplated
sale of the Properties, as well as for RCS’s multiple breaches of contract. (Index No.
655790/2018.) Since the commencement of these legal proceedings, Mr. Cairo has only doubled
down on his efforts to slander Plaintiffs’ title in the Properties and interfere with Plaintiffs’ ability
to sell the Properties.
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8. Blackstone, including the Blackstone Entities and its other affiliates, is a large,
regulated, and long-term New York-based investor with investments worldwide that has fiduciary
obligations to its investors—some of the world’s largest and most reputable pension plans,
sovereign wealth funds, and public and private endowments. It is on behalf of these highly
institutional beneficiaries that the Blackstone Entities make investments. For example, the
investment in the Properties by the Blackstone Entities was ultimately made by, among others,
New York-based pension funds, universities, and other institutions, as investors in the funds
controlled by the Blackstone Entities. It is therefore ultimately on behalf of these investors that
Plaintiffs seek redress for Mr. Cairo’s malicious and extortive conduct.
9. Plaintiffs’ action against RCS in this Court is in its early stages. It is Plaintiffs’
intention to request that this action be consolidated with their action against RCS.
10. Plaintiffs, and their investors, have already incurred damages in the form of legal
and other expenses arising from Mr. Cairo’s misconduct. Should Plaintiffs’ sale of their interests
in the Properties be further delayed, or worse, should Plaintiffs lose the opportunity to sell their
interests in the Properties, the damages caused by Mr. Cairo, both economic and reputational, will
exponentially increase.
11. Accordingly, by this action, Plaintiffs seek compensatory damages, as well as
punitive damages, for the substantial injury caused by Mr. Cairo’s tortious conduct in maliciously
and slanderously interfering with Plaintiffs’ efforts and expectancy to complete the sale of their
interests in the Properties.
JURISDICTION AND VENUE
12. This Court has personal jurisdiction over Defendant Mr. Cairo pursuant to CPLR
§ 301. Mr. Cairo transacts substantial business within the State of New York, purposefully avails
himself of the benefits and privileges of conducting business in the State of New York, and is
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expected to be physically present in New York for business during the week of April 21, 2019,
when he will be served with a copy of the Summons and Complaint.
13. It has been publicly reported that Mr. Cairo will be traveling to New York during
the week of April 21, 2019 to meet with potential investors and American media publishers. Mr.
Cairo’s trip was publicized in the Italian media, which speculated that Mr. Cairo’s visit could
reflect increased business activity in the United States for Mr. Cairo and RCS. Plaintiffs intend to
serve Mr. Cairo with a copy of the Summons and Complaint after he arrives in New York.
14. Service of process on an individual physically present in New York “is a time-
honored basis for the exercise of in personam jurisdiction.” Vincent C. Alexander, Practice
Commentaries to CPLR § 301 (2010). Defendant’s physical presence at the time of service grants
this Court general jurisdiction over him.
15. This Court also has personal jurisdiction over Mr. Cairo pursuant to CPLR
§ 302(a)(3). Plaintiffs are in a business relationship with Allianz, and Plaintiffs were near
consummating a sale of their interests in the Properties to Allianz. Mr. Cairo intentionally and
tortiously interfered with Plaintiffs’ business relationship with Allianz by contriving claims and
threatening frivolous legal action to impede the contemplated sale of the Properties—in an attempt
to extort Plaintiffs. The claims in this Complaint also therefore arise from Mr. Cairo’s tortious
interference. Mr. Cairo’s tortious interference is causing injury to the Blackstone Entities in New
York by impeding the proposed sale of Plaintiffs’ interests in the Properties and damaging the
Blackstone Entities’ reputation in the New York financial industry. Mr. Cairo, who upon
information and belief earns a substantial portion of his income per year through international
commerce, was aware that his interference would have consequences for the Blackstone Entities,
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both economically and reputationally, in New York. This Court therefore has jurisdiction to hear
Plaintiffs’ claims against Mr. Cairo for his tortious conduct causing injury within New York.
16. Venue is proper in this Court pursuant to CPLR § 503, as the Plaintiff Blackstone
Entities reside in New York County. Moreover, a significant portion of the events leading to the
claims in this Complaint occurred in New York, and Defendant’s tortious conduct caused
substantial injury here.
THE PARTIES
17. Plaintiff Blackstone is a Delaware limited partnership, with its principal offices at
345 Park Avenue, 31st Floor, New York, NY 10154. Blackstone is an investment firm specializing
in equity investments in real property throughout the world. Blackstone is a subsidiary of The
Blackstone Group L.P., also based in New York, which is one of the leading investment firms in
the world.
18. Plaintiff Blackstone Real Estate Partners Europe IV-NQ L.P. is a limited
partnership incorporated in the Cayman Islands, with its principal offices at 345 Park Avenue, 31st
Floor, New York, NY 10154. Blackstone Real Estate Partners Europe IV-NQ L.P. indirectly owns
75.6% of the share capital in Plaintiff Sforza, which is the 100% owner of the units of Delphine
(which owns and holds the Properties).
19. Plaintiff Blackstone Real Estate Holdings Europe IV-NQ ESC L.P. is a limited
Floor, New York, NY 10154. Blackstone Real Estate Holdings Europe IV-NQ ESC L.P. indirectly
owns 0.400% of the share capital in Plaintiff Sforza.
20. Plaintiff Blackstone Family Real Estate Partnership Europe IV SMD L.P. is a
limited partnership incorporated in the Cayman Islands, with its principal offices at 345 Park
Avenue, 31st Floor, New York, NY 10154. Blackstone Family Real Estate Partnership Europe IV
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SMD L.P. indirectly owns 0.667% of the share capital in Plaintiff Sforza.
21. Plaintiff Blackstone Real Estate Partners (Offshore) VII-NQ L.P. is a Delaware
limited partnership, with its principal offices at 345 Park Avenue, 31st Floor, New York, NY
10154. Blackstone Real Estate Partners (Offshore) VII-NQ L.P. indirectly owns 6.067% of the
share capital in Plaintiff Sforza.
22. Plaintiff Blackstone Real Estate Partners (Offshore) VII.F-NQ L.P. is a Delaware
limited partnership, with its principal offices at 345 Park Avenue, 31st Floor, New York, NY
10154. Blackstone Real Estate Partners (Offshore) VII.F-NQ L.P. indirectly owns 7.933% of the
share capital in Plaintiff Sforza.
23. Plaintiff Blackstone Real Estate Partners (Offshore) VII.TE.1-8-NQ L.P. is a
Delaware limited partnership, with its principal offices at 345 Park Avenue, 31st Floor, New York,
NY 10154. Blackstone Real Estate Partners (Offshore) VII.TE.1-8-NQ L.P. indirectly owns
5.533% of the share capital in Plaintiff Sforza.
24. Plaintiff Blackstone Family Real Estate Partnership (Offshore) VII-SMD L.P. is a
limited partnership incorporated in Alberta, Canada, with its principal offices at 345 Park Avenue,
31st Floor, New York, NY 10154. Blackstone Family Real Estate Partnership (Offshore) VII-
SMD L.P. indirectly owns 0.200% of the share capital in Plaintiff Sforza.
25. Plaintiff Blackstone Real Estate Holdings (Offshore) VII-NQ-ESC L.P. is a limited
partnership incorporated in Alberta, Canada, with its principal offices at 345 Park Avenue, 31st
Floor, New York, NY 10154. Blackstone Real Estate Holdings (Offshore) VII-NQ-ESC L.P.
indirectly owns 0.200% of the share capital in Plaintiff Sforza.
26. Plaintiff Blackstone Real Estate Holdings (Offshore) VII-NQ L.P. is a limited
partnership incorporated in Alberta, Canada, with its principal offices at 345 Park Avenue, 31st
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Floor, New York, NY 10154. Blackstone Real Estate Holdings (Offshore) VII-NQ L.P. indirectly
27. Plaintiff Blackstone Real Estate Partners Europe IV.F-NQ L.P. is a limited
partnership incorporated in Delaware, with its principal offices at 345 Park Avenue, 31st Floor,
New York, NY 10154. Blackstone Real Estate Partners Europe IV.F-NQ L.P. indirectly owns
2.067% of the share capital in Plaintiff Sforza.
28. Plaintiff Blackstone Real Estate Partners Europe IV.2-NQ L.P. is a limited
Floor, New York, NY 10154. Blackstone Real Estate Partners Europe IV.2-NQ L.P. indirectly
29. Plaintiff Sforza is a private limited liability company, incorporated under the laws
of Luxembourg, with its registered office at 2-4 rue Eugène Ruppert, L-2454 Luxembourg, Grand
Duchy of Luxembourg. Sforza is wholly owned by the Plaintiff Blackstone Entities. Sforza
wholly owns the units of the investment fund Delphine and, along with the other Plaintiffs, was a
party to the 2013 Transaction.
30. Plaintiff Kryalos is a sole shareholder company, incorporated under the laws of
Italy, with its registered office at Via Brera no. 3 – 20121 Milan, Italy. Kryalos is the legal
representative of Delphine and manages the real property that was involved in the 2013
Transaction. Delphine is a closed-end alternative real estate investment fund, organized under the
laws of Italy. Delphine is the direct owner of the Properties and is wholly owned by Plaintiff
Sforza. Plaintiff Kryalos is Delphine’s designated legal representative under Italian law. Delphine
was a party to the 2013 Transaction.
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31. Defendant Urbano Cairo is a citizen of Italy. Mr. Cairo began his career working
for former Italian prime minister and media magnate Silvio Berlusconi and his family holding
company Fininvest S.p.A. (“Finivest”). In connection with his work with Fininvest, Mr. Cairo
was criminally charged by Italian prosecutors with false accounting, false invoicing, money
laundering and tax evasion. As a result of a plea, Mr. Cairo received a 19-month suspended
sentence with probation of five years. Following his dismissal from Fininvest, Mr. Cairo set up
his own media business. Mr. Cairo is currently the Chairman and controlling shareholder of Cairo
Communication S.p.A., a media and publishing conglomerate based in Milan, Italy. In turn, Cairo
Communication owns a 60% stake in fellow media and publishing company RCS. Mr. Cairo has
had control of RCS since August 2016, when he seized control of the company in a hostile
takeover.
BACKGROUND
I. RCS DETERMINES TO MARKET THE PROPERTIES FOR SALE AND CONDUCTS
A ROBUST SALES PROCESS.
32. In 2012, the then-leadership of RCS, supported by financial and legal advisors,
including investment bank Credit Suisse, crafted a strategic plan (the “Development Plan”) to be
executed over the following three years. RCS’s three-year Development Plan included, among
other things, initiatives to pursue sales of various non-core assets, including certain magazines and
real estate assets—in order for the company to focus on its core businesses, digital offerings, and
overall company efficiency.
33. In June 2013, RCS agreed on a transaction to sell 14 of the magazines it owned.
Also in June 2013, RCS signed a loan agreement with several banks, including Unicredit S.p.A.,
BNP Paribas, and Intesa Sanpaolo S.p.A., for €600 million. And, in July 2013, RCS successfully
completed a rights offering for €410 million that reduced the company’s leverage and extended its
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debt maturity profile by several years. Leading Italian corporations—including FIAT,
Mediobanca, Pirelli, and Intesa Sanpaolo—participated in RCS’s July 2013 rights offering. These
capital structure transactions with major banks and corporations reflected broad confidence in
RCS’s business and prospects in advance of the 2013 Transaction, which was not agreed upon
until several months after the company’s successful execution of these transactions.
34. The Development Plan also called for RCS to seek to sell certain principally non-
core commercial properties it owned in Milan, including the Properties. The Properties consist of
three interconnected commercial buildings (Blocks 1, 2, and 3), which today house multiple
businesses and commercial tenants—including RCS, which occupies a portion representing 38%
of the Properties’ total lettable area. In connection with the Development Plan’s directive to sell
the non-core Properties, RCS retained Banca IMI S.p.A. (“Banca IMI”) as its financial advisor.
Banca IMI is one of Italy’s leading financial institutions, active in investment banking, mergers
and acquisitions, real estate, structured finance, and capital markets, and Banca IMI operates at a
global level.
35. The marketing and sales process for the Properties spanned over a year. In
connection with this process, and as reflected in press releases issued by RCS, RCS and Banca
IMI utilized a number of independent appraisers for property valuations of the Properties, and
Banca IMI initiated contacts with over 30 potential real estate investors from across the globe,
including several in New York, seeking prospective purchasers for the Properties.
36. RCS and Banca IMI conducted a widespread marketing campaign as to the
Properties. They began the sales and bidding process by sending “teasers” to at least 30 potential
investment firms, seeking to spark interest in the Properties. RCS then moved forward with
entering into non-disclosure agreements with at least 20 potential purchasers (including several in
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New York, including J.P. Morgan, Morgan Stanley, Och-Ziff, Cerberus, Carlyle, and Blackstone).
Additionally, RCS and Banca IMI sent a 30-page informational memorandum about the Properties,
as well as bid process letters, to at least 20 real estate investment firms (including several based in
New York).
37. As a result of these efforts, RCS received non-binding offers from five potential
purchasers interested in acquiring the Properties.
II. PLAINTIFFS PURCHASE THE PROPERTIES FROM RCS.
38. After evaluating the five non-binding offers received for the Properties, RCS
determined to enter into exclusive negotiations with Blackstone. Blackstone’s initial bid for the
Properties, made on July 8, 2013, was €108 million. On July 29, 2013, Blackstone raised its offer
to €114 million, and on August 1, 2013, Blackstone raised its offer to €115 million. Blackstone’s
offers were not contingent on obtaining financing from outside sources, meaning that Blackstone
would be able to proceed with the transaction without delay. Based on Blackstone’s August 1 bid,
on August 7, 2013, RCS agreed to the continuation of exclusive negotiations with Blackstone.
39. Following a period of due diligence and further negotiations, on November 13,
2013, RCS issued a press release announcing that RCS and Blackstone had entered into a
preliminary agreement for the sale of the Properties for €120 million. The press release noted that
the sale of the Properties to Blackstone “conclude[d] a long and comprehensive process, which
was examined in various board meetings, and was approved on November 5, 2013.” The press
release further detailed the sales process for the Properties, including RCS’s and Banca IMI’s
approaches to 30 real estate investors, the use of property valuations by independent appraisers,
and the receipt of non-binding offers from five bidders. Finally, RCS’s November 13 press release
pronounced the offer by Blackstone as “the most attractive bid,” explained that the €120 million
sale price to be paid by Blackstone was “substantially in line with the valuation by a leading real
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estate advisor for” RCS, and noted that the price to be paid was higher than the carrying value of
the Properties on RCS’s books.
40. As noted in RCS’s press release, RCS and Sforza entered into the Preliminary Asset
Purchase Agreement (the “APA”) on November 13, 2013. Sforza is an entity that was created for
the purpose of purchasing the Properties, and 100% of the shares of Sforza are owned indirectly
by the Blackstone Entities. The APA contemplated RCS and Sforza, or a designee of Sforza,
entering into final sale and purchase agreements (the “SPAs”) for the Properties and RCS entering
into lease agreements for certain substantial areas of the Properties. Additionally, the APA
contemplated Sforza leasing back the Properties to RCS for varying lease lengths (two years for
62% of the lettable area and nine years for 38% of the lettable area).
41. On or about December 23, 2013 and March 6, 2014, RCS entered into the SPAs for
the Properties with Delphine—Sforza’s wholly owned designee—thereby completing the sale of
the Properties contemplated by the APA. The SPAs included the transfer of title of the Properties
from RCS to Delphine (then managed by BNP Paribas Real Estate), guarantees by RCS of full
ownership of the Properties, and various other provisions, including an Italian choice of law
provision, but no arbitration clause.
42. At the same time the SPAs were executed, RCS also entered into a related
agreement with the Blackstone Entities (the “Shareholders Agreement”). Under the Shareholders
Agreement, the Blackstone Entities agreed, among other things, not to sell the Properties for a
period of at least one year following the date of the Shareholders Agreement. The Shareholders
Agreement was executed by a New York-based Blackstone executive on behalf of each of the
Blackstone Entities. And, RCS agreed in the Shareholders Agreement to direct all notices,
requests, or other communications to Blackstone’s New York headquarters.
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43. At the same time, RCS also entered into lease agreements relating to the Properties
with BNP Paribas Real Estate Investment Management Italy (“BNP”), in its capacity as
management company for Delphine. BNP has since been replaced by Plaintiff Kryalos as the
management company for Delphine. The term of the lease agreement with RCS for Block 2, which
comprises 62% of the total Gross Leasable Area of the Properties, was only for two years—
significantly shorter than market standard lease terms (and therefore riskier for both Plaintiffs as
landlord and for financing banks).
44. In addition to RCS’s sale and leaseback of the Properties being guided by highly
sophisticated financial and legal advisors, as well as RCS’s engaged and experienced management
and Board of Directors, the 2013 Transaction was also overseen and monitored by RCS’s Board
of Statutory Auditors. In Italy, a company’s Board of Statutory Auditors is similar to an internal
control and audit committee, except the Board of Statutory Auditors is made up only of
independent experts. The Board of Statutory Auditors works to ensure the proper administration
and operation of the company according to its code of ethics and relevant Italian law and
regulations.
45. At the end of 2013, RCS’s Board of Statutory Auditors issued its mandatory report
to RCS’s shareholders, in which the Board of Statutory Auditors detailed its participation in, and
supervision of, the 2013 Transaction. Among other things, the Board of Statutory Auditors
reported on how it “monitored the various phases of the [2013 Transaction],” “examined the
evaluations . . . concerning the ‘market’ value of the [Properties] and the consistency of the
purchase offers received by the Company,” and participated in several Board of Directors meetings
“in order to ensure that the decision-making process was taking place in the correct manner on the
basis of all information and elements for evaluation required to ensure that a reasonable decision
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was made in terms of cost-effectiveness, in the best interest of the company.”
III. PLAINTIFFS REVITALIZE THE PROPERTIES BY INVESTING IN
IMPROVEMENTS AND ATTRACTING NEW TENANTS.
46. When Plaintiffs executed the 2013 Transaction and purchased the Properties, they
faced a challenging market environment. Real estate fundamentals in 2013 in Europe, including
in Italy, were poor. Vacancy levels in Milan and elsewhere in Italy were well above historical
averages. And, confidence in the Italian economy was low. Italy had experienced a protracted
recession that continued into 2013, with the country’s Real GDP having contracted by 7% over
the previous five years, and unemployment was over 12%. In July 2013, S&P downgraded the
rating of Italy’s government debt to BBB, which is just two notches above “junk.”
47. Approximately two years after Plaintiffs acquired the Properties, RCS vacated
Block 2 (at the expiration of the two-year leases it entered as part of the 2013 Transaction and with
the Properties being non-core to RCS). Block 2 represented approximately 62% of the combined
lettable area of the Properties, meaning that RCS’s departure left nearly two-thirds of the Properties
unoccupied, non-income producing, and in need of renovation. As a result of RCS vacating
Block 2, the net rental income generated by the Properties significantly decreased.
48. Following RCS’s departure from Block 2, Plaintiffs spent over €17 million just on
renovating Block 2 of the Properties, including by adding an additional entrance and expanding
the height of the building to create viable rental space on an additional floor. These renovations
transformed Block 2 from a more challenging single-tenant space into a flexible, multi-tenant
space, allowing Plaintiffs to divide Block 2 into three commercial rental units.
49. Following the renovations, Plaintiffs worked diligently to bring in new and
reputable anchor tenants. Leasing Block 2 was challenging but, over time and with significant
effort, Plaintiffs were successful as they were able to attract three highly reputable commercial
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tenants: UBI Banca, Loro Piana, and Cassa Depositi e Prestiti (a subsidiary of the Italian
government). These new leases brought the Properties to 100% occupancy and significantly
increased the rental income generated by the Properties, thereby significantly increasing the market
value of the Properties overall.
IV. PLAINTIFFS MARKET THE PROPERTIES FOR SALE FIVE YEARS AFTER
THE 2013 TRANSACTION.
50. After having invested substantial resources into renovations and improvements, and
having successfully acquired reputable long-term tenants for the newly renovated and fully
occupied Properties, Plaintiffs recently began to seek a potential purchaser for their interests in the
Properties, nearly five years after the 2013 Transaction. That Plaintiffs would seek to sell the
Properties during 2018 was also in accord with the five-year investment horizon, of which
Blackstone first informed RCS in its 2013 bid documents.
51. Plaintiffs began marketing the Properties to select investors in early 2018. After
preliminary discussions, Allianz emerged as the leading candidate to acquire Plaintiffs’ interests
in the Properties.
52. On June 14, 2018, Allianz provided Plaintiffs with a formal letter of interest,
proposing an exclusivity period to negotiate Allianz’s acquisition of the interests in the Properties.
Plaintiffs accepted Allianz’s proposal on June 22, 2018, establishing an exclusivity period.
53. During the exclusivity period, Plaintiffs and Allianz exchanged multiple drafts of
documents for the consummation of a transaction. By early July, Plaintiffs and Allianz had agreed
on all material terms and expected to sign a final binding agreement by the end of July or early
August, with a closing to occur in September 2018.
V. CAIRO MALICIOUSLY INTERFERES WITH PLAINTIFFS’ EFFORTS TO
SELL THE PROPERTIES.
54. RCS’s Board of Directors lauded the 2013 Transaction in both the company’s 2013
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Annual Report (issued by the RCS Board of Directors on March 10, 2014) and 2014 Annual Report
(issued by the RCS Board of Directors on March 11, 2015). In the 2013 Annual Report, in addition
to describing Plaintiffs’ bid as the “most economically and financially attractive,” the Board of
Directors also noted that “[t]hanks to [the 2013 Transaction], the Group’s debt is expected to
contract compared to December 31, 2013.” And, in the 2014 Annual Report, the RCS Board of
Directors described the 2013 Transaction as having had “a positive effect on financial expense
trends.”
55. In 2016, Mr. Cairo, via his company Cairo Communication, completed a hostile
takeover of RCS. Mr. Cairo is now the Chairman of the Board, Chief Executive Officer, and
controlling shareholder of RCS. Mr. Cairo, however, was not a newcomer to RCS in 2016. In
July 2013, several months before execution of the 2013 Transaction, Mr. Cairo acquired a 2.8%
stake in RCS. RCS’s 2013 Annual Report notes that before the 2013 Transaction was executed,
Mr. Cairo wrote to RCS’s Board of Directors and to RCS’s Board of Statutory Auditors raising
objections to the contemplated 2013 Transaction. Mr. Cairo’s objections to the 2013 Transaction,
however, were not to challenge the validity of the sale or to even suggest that Plaintiffs’ offer was
for less than fair market value for the Properties. Rather, according to media reports at the time,
Mr. Cairo complained in 2013 that “selling a property today means selling in a low-priced market.
We should think of alternatives.” Thus, Mr. Cairo only complained that the timing of the sale was
inopportune because the Milan real estate market was depressed in 2013, and he in fact admitted
the health of RCS at the time of the 2013 Transaction by suggesting that the company had
“alternatives” to selling the Properties.
56. In any event, notwithstanding Mr. Cairo’s comments regarding the timing of, and
alternatives to, the proposed sale to Plaintiffs, on November 5, 2013, RCS’s Board of Directors
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resolved to execute on the 2013 Transaction, and subsequently RCS took all necessary actions to
close the 2013 Transaction. Thereafter, neither RCS nor Mr. Cairo ever communicated to
Plaintiffs any objection to the 2013 Transaction (until July 2018).
57. On July 10, 2018, an article appeared in the Italian national daily business
newspaper, MF-Milano Finanza, reporting on Allianz’s contemplated purchase of Plaintiffs’
interests in the Properties. MF-Milano Finanza competes with RCS publications. The article
reported that the parties were near an agreement whereby Allianz would pay €250 million for
Plaintiffs’ interests in the Properties and emphasized the profitable nature of Plaintiffs’ five-year
investment in the Properties.
58. On July 13, 2018, three days after publication of the article in MF-Milano Finanza,
Mr. Cairo sent a letter to Plaintiffs, on behalf of RCS. This letter claimed that the 2013 Transaction
was somehow “null and void” because, according to Defendant, RCS was in financial distress at
the time of the 2013 Transaction and there was an imbalance in the terms and conditions, benefits,
and returns among the parties to the 2013 Transaction.
59. The timing of Mr. Cairo’s July 13 letter was not coincidental. Upon information
and belief, Mr. Cairo was aware that Plaintiffs were nearing a sale of their interests in the
Properties—whether that awareness stemmed from the MF-Milano Finanza article or from other
earlier sources. As a sophisticated businessman, Mr. Cairo knew before sending the July 13 letter
that Blackstone would be compelled to disclose to prospective purchaser Allianz any claims
against the title to the Properties, even if those claims were frivolous.
60. Mr. Cairo’s July 13 letter therefore was spurious, malicious, and extortionate, and
plainly aimed at slandering Plaintiffs’ title to the Properties and interfering with Plaintiffs’
contemplated sale transaction with Allianz. Mr. Cairo knew the assertions in the July 13 letter
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were false at the time the letter was sent.
61. Mr. Cairo has since publicly claimed that July 13 was not the first time he informed
Plaintiffs he would to seek to invalidate the 2013 Transaction. Instead, Mr. Cairo claims he
somehow notified Plaintiffs of his position by letter in March 2018. This public statement by
Mr. Cairo is also patently false, as no letter from either Mr. Cairo or RCS prior to July 13, 2018
suggested that either would question the validity of the 2013 Transaction. Further, it is of little
relevance whether Mr. Cairo’s malicious scheme to extort Plaintiffs began in March 2018 or in
July 2018. In March and July 2018, both five years after the 2013 Transaction, Mr. Cairo knew
that Plaintiffs were soon going to be seeking to sell the Properties to a third party, knew his
challenge to the validity of the 2013 Transaction was malicious and baseless, and intended to
interfere with such a sale and do damage to Plaintiffs.
62. Plaintiffs were compelled to immediately inform their prospective purchaser,
Allianz, of Mr. Cairo’s July 13 letter and his malicious and slanderous claims. Allianz justifiably
has since taken the position that it will not consummate the purchase of Plaintiffs’ interests in the
Properties until Mr. Cairo’s claims are withdrawn or otherwise resolved. Plaintiffs have already
incurred damages due to the delay in consummating a transaction to sell Plaintiffs’ interests in the
Properties, as well as damages in the form of legal and other professional fees expended to address
the consequences of Mr. Cairo’s spurious claims. Plaintiffs’ damages, both economic and
reputational, will increase exponentially if Mr. Cairo’s misconduct causes Plaintiffs’ sale of their
interests in the Properties to be further delayed or causes Plaintiffs to lose the opportunity to sell
their interests in the Properties to Allianz and to realize a return on investment for Plaintiffs’
investors.
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63. After July 13, Plaintiffs had numerous communications with Mr. Cairo, requesting
that he disavow his claim that the 2013 Transaction is null and void. Those communications
proved to be futile. On November 8, 2018, undersigned counsel for Plaintiffs emailed a letter to
Mr. Cairo and other members of RCS’s Board of Directors, once again requesting that Mr. Cairo
and RCS withdraw their spurious claims and stating that Plaintiffs would commence a lawsuit in
a New York court seeking declaratory relief and damages if Mr. Cairo and RCS did not take such
ameliorative actions by November 13, 2018.
64. On November 9, 2018, in response to undersigned counsel’s November 8 letter and
in an effort to be “first-filed,” RCS rushed to commence an arbitration in Milan seeking a
determination that the 2013 Transaction is null and void. On November 20, 2018, Plaintiffs
commenced an action against RCS in this Court (Index No. 655790/2018).
65. On November 21, 2018, Reuters published a story entitled “RCS Mediagroup
already challenged property sale to Blackstone in March - source.” The article describes
statements attributed to an unnamed “source” who said that Mr. Cairo and RCS actually first
informed Plaintiffs of Defendant’s position that the 2013 Transaction was void in March, not July,
2018. Upon information and belief, Mr. Cairo is the unnamed “source” in the article. There is, of
course, no one else who could have provided this information (which was entirely false) other than
Mr. Cairo. Mr. Cairo made these statements to one or more reporters to further damage Plaintiffs’
collective ability to sell the Properties by suggesting that Plaintiffs negligently delayed to inform
prospective purchasers of the Properties about Mr. Cairo’s baseless claims regarding the validity
of the 2013 Transaction. Such an assertion is patently false, is utterly defamatory as to Blackstone
and all Plaintiffs, and further demonstrates the ongoing nature of Mr. Cairo’s interference with
Plaintiffs’ prospects for selling the Properties.
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COUNT I
Tortious Interference with Prospective Business Relations
66. Plaintiffs repeat the allegations contained in the preceding paragraphs as if fully set
forth herein.
67. Plaintiffs had the real expectancy of prospective business relations with Allianz for
the sale of Plaintiffs’ interests in the Properties. The basic terms of the contemplated sale were set
forth in, among other writings, the provisions of the letter of interest between Plaintiffs and Allianz.
Plaintiffs thus had a real expectancy that Plaintiffs and Allianz would enter into an economically
advantageous business relationship.
68. Upon information and belief, Mr. Cairo maliciously and intentionally interfered
with Plaintiffs’ prospective business relations with Allianz using dishonest, unfair, and improper
means.
69. Upon information and belief, Mr. Cairo was aware of Plaintiffs’ intention to sell
the Properties during 2018 and aware of Plaintiffs’ impending plans to sell their interests in the
Properties to Allianz and deliberately asserted a frivolous right to void the 2013 Transaction in an
attempt to slander title and impede the sale of the Properties by inducing Allianz and other
prospective purchasers not to enter into a transaction, even though Mr. Cairo knew he had no legal
basis to claim that the 2013 Transaction is now void, five years after its consummation. Knowing
that Plaintiffs were in negotiations for the sale of the Properties with Allianz, Mr. Cairo challenged
the validity of the 2013 Transaction and falsely challenged the veracity of Plaintiffs, both in letters
to Plaintiffs and in public statements. This interference was conducted in a malicious, wrongful,
and improper manner.
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70. Upon information and belief, but for Mr. Cairo’s malicious interference with
Plaintiffs’ prospective business relations with Allianz and other prospective purchasers, Plaintiffs
would be in a position to move forward with the transaction to sell their interests in the Properties.
71. As a direct and proximate result of Mr. Cairo’s malicious and intentional actions,
Plaintiffs have suffered economic harm, including, without limitation, the incurrence of legal fees
and other expenses to address Mr. Cairo’s spurious claims. Plaintiffs also face the loss of revenues
Plaintiffs would have derived had Plaintiffs consummated the sale of Plaintiffs’ interests in the
Properties. Plaintiffs also face the incurrence of reputational damage stemming from Mr. Cairo’s
misconduct—based on Plaintiffs’ inability to close on the contemplated transaction and to provide
Plaintiffs’ investors with a return on their investment in the Properties.
72. Accordingly, Plaintiffs have suffered damage as a result of Mr. Cairo’s intentional
interference with Plaintiffs’ prospective business relations in an amount to be proven at trial, but
in any event an amount no less than $500,000 (the monetary threshold for the New York County
Commercial Division).
73. Mr. Cairo’s tortious acts were of an egregious and morally culpable nature.
74. Accordingly, awards of compensatory damages and punitive damages to Plaintiffs
from Mr. Cairo are justified, in amounts to be determined at trial.
COUNT II
Slander of Title
75. Plaintiffs repeat the allegations contained in the preceding paragraphs as if fully set
forth herein.
76. Mr. Cairo has deliberately cast doubt on the validity of Plaintiffs’ title to the
Properties. In letters to Plaintiffs (that Plaintiffs were obligated to share with Allianz, a prospective
purchaser of the Properties), Mr. Cairo, as Chairman of RCS, asserted a frivolous right to void the
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2013 Transaction that transferred the rights and interest in the Properties to Plaintiffs. Mr. Cairo’s
assertions, five years after the consummation of the 2013 Transaction, were made maliciously and
with a reckless disregard for Plaintiffs’ rightful title to the Properties.
77. Upon information and belief, Mr. Cairo was aware of Plaintiffs’ impending plans
to sell their interests in the Properties to Allianz. Mr. Cairo further knew that if it challenged
Plaintiffs’ title to the Properties, Plaintiffs would be obligated to notify Allianz of such claims and
that Allianz, like any prospective purchaser, would likely refrain from finalizing a transaction with
Plaintiffs to purchase the Properties unless and until RCS’s claim to title is withdrawn or otherwise
resolved.
78. But for Mr. Cairo’s false assertions that disparaged Plaintiffs’ title to the Properties,
Plaintiffs would be in a position to move forward with the transaction to sell their interests in the
Properties to Allianz for an agreed-upon, substantial price.
79. As a direct and proximate result of Mr. Cairo’s malicious and intentional actions,
Plaintiffs have suffered economic harm, including, without limitation, the incurrence of legal fees
and other expenses to address Mr. Cairo’s spurious claims. Plaintiffs also face the loss of revenues
Plaintiffs would have derived had Plaintiffs consummated the sale of Plaintiffs’ interests in the
Properties. Plaintiffs also face the incurrence of reputational damage stemming from Mr. Cairo’s
misconduct—based on Plaintiffs’ inability to close on the contemplated transaction and to provide
Plaintiffs’ investors with a return on their investment in the Properties.
80. Accordingly, Plaintiffs have suffered damage as a result of Mr. Cairo’s slander of
Plaintiffs’ title to the Properties in an amount to be proven at trial, but in any event an amount no
less than $500,000 (the monetary threshold for the New York County Commercial Division).
81. Mr. Cairo’s tortious acts were of an egregious and morally culpable nature.
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82. Accordingly, awards of compensatory damages and punitive damages to Plaintiffs
from Mr. Cairo are justified, in amounts to be determined at trial.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs pray that this Court enter judgment in their favor on their claims
for relief set forth above and award them relief, including, but not limited to, the following:
(i) Entry of an order against Defendant Urbano Cairo for all monetary damages
Plaintiffs have suffered as a result of the wrongful conduct alleged herein, in an
amount to be determined at trial, but not less than $500,000;
(ii) Entry of an order against Defendant Urbano Cairo for punitive damages, in an
amount to be determined at trial; and
(iii) Such other and further relief as the Court deems just and proper.
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Dated: New York, New York
April 22, 2019
Respectfully submitted,
/s/ Lamina Bowen
_______________________
Lamina Bowen
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
Email: lamina.bowen@kirkland.com
Counsel to Plaintiffs Blackstone Real Estate
Advisors L.P., Blackstone Real Estate Partners
Europe IV-NQ L.P., Blackstone Real Estate
Holdings Europe IV-NQ ESC L.P., Blackstone
Family Real Estate Partnership Europe IV
SMD L.P., Blackstone Real Estate Partners
(Offshore) VII-NQ L.P., Blackstone Real Estate
Partners (Offshore) VII.F-NQ L.P., Blackstone
Real Estate Partners (Offshore) VII.TE.1-8-NQ
L.P., Blackstone Family Real Estate
Partnership (Offshore) VII-SMD L.P.,
Blackstone Real Estate Holdings (Offshore)
VII-NQ-ESC L.P., Blackstone Real Estate
Holdings (Offshore) VII-NQ L.P., Blackstone
Real Estate Partners Europe IV.F-NQ L.P.,
Blackstone Real Estate Partners Europe IV.2-
NQ L.P., Sforza Holdco S.à.r.l., and Kryalos
SGR S.p.A, in its capacity as management
company of the Delphine Fund.
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