Fund manager CIM Group has reportedly sued Cantor Fitzgerald in Delaware state court claiming that Cantor collected $37.3 million in excess fees through their joint venture in Cantor Commercial Real Estate, according to a report in the Wall Street Journal.
In 2010, CIM invested $350 million in to help launch Cantor Commercial, a real estate finance firm that originates mortgages and mezzanine loans. CIM now holds a 50 percent stake, while Cantor owns 10 to 11 percent of the business. Cantor Fitzgerald and CIM serve as co-general partners. Other investors include the State Teachers Retirement System of Ohio, according to the Journal.
CIM claims that over the past year Cantor Fitzgerald has circumvented CIM’s oversight rights and used Cantor Commercial as “a vehicle for unauthorized self-dealing in flagrant disregard of its obligations.”
The suit alleges that Cantor charged Cantor Commercial fees on transactions for which most managers would not have typically charged anything, including “blatantly improper” underwriting fees on 35 securitizations. It accuses Cantor of providing “negligible, if any, underwriting services” on many such deals, the Journal reports.
Cantor Fitzgerald is denying the allegations. Three Cantor executives countered Tuesday in a letter sent to CIM officials, saying that the fees are justified for services including underwriting, credit analysis, risk analysis and help in pricing every loan that Cantor Commercial bid on, the Journal stated. The executives added that those fees are outlined in reports that it sends to CIM employees.
“Your allegations are premised on your fundamental misunderstanding about the business and the partnership,” the executives wrote. “The partnership agreement explicitly provides that the Cantor Fitzgerald general partner will engage its affiliates to provide underwriting and financial advisory services at competitive market rates.”
Cantor Commercial has consistently ranked among the top CMBS lenders over the last several years, having originated more than $5 billion in CMBS loans in 2014, according to sister publication Real Estate Capital. Cantor Commercial is co-headed by Anthony Orso and Michael Lehrman, former managing directors and co-heads of Credit Suisse’s Real Estate Direct Group.