USAA Real Estate Company has been sued by Confido Advisors, a New Jersey-based placement agency, for at least $3 million, according to a lawsuit filed last month in New York’s civil court.
Confido, led by former Credit Suisse executive John Rodriguez, alleged that the San Antonio, Texas-based investment manager withheld at least $825,000 in payment for arranging investor commitments and tarnished the agency’s reputation with South Korean investors.
The placement agency began working with Square Mile Capital in 2010 to market the New York-based real estate firm’s funds to South Korean investors. USAA acquired a stake in Square Mile in 2012, and Confido subsequently formed a similar partnership with USAA from 2012 to the end of 2015.
Under the agreement, USAA RealCo paid Confido both an unspecified retainer fee and 100 basis points – later reduced to 75 basis points – of capital commitments made by investors introduced by Confido to any USAA vehicles. According to the lawsuit, Confido introduced USAA RealCo to 100 prospects, with 15 ultimately investing $600 million in various vehicles. During the term of the partnership, Confido agreed not to work as a placement agent for other US real estate vehicles.
The partnership also included a stipulation that investors which were interested in investing, but which did not invest before the end of the agreement, would be placed on a list indicating their future interest. Confido would be paid if those prospective investors then committed capital.
In the lawsuit, Confido alleged that Susan Wallace, the former head of USAA RealCo’s global investor group, who retired in May 2016, took two institutions off the prospective list and the groups later invested in undisclosed funds. Suhyup, the Korean Fisheries Pension Fund, committed $30 million, which would have earned Confido a $225,000 fee, and Seoul National University earmarked $10 million, which would have resulted in a $75,000 fee.
Confido also said Korea Post Office expressed interest in investing and later communicated with USAA RealCo, but this correspondence was not shared with Confido. The investor eventually committed $70 million to USAA’s Eagle Fund, which would have earned Confido $525,000, but USAA said the specific investor was not listed under the agreement.
The placement agency further alleged that USAA RealCo failed to call capital, which resulted in withheld payments. In one instance, Korean pension fund Military Mutual Aid’s fund commitment was not called, which Confido said was “apparent retaliation for MMA’s attempts to make a direct investment in real estate investment opportunities outside of USAA RealCo, despite having already made capital commitments to USAA RealCo, not on the basis of any legitimate commercial reason.”
Confido also alleged reputational damage after introducing USAA RealCo to the Pension Office Benefit Association, after which USAA RealCo arranged, then canceled, a trip to Texas for investor education, citing possible securities law violations. Following the canceled trip, POBA refused to work with Confido and “this incident severely tarnished Confido’s reputation, and Rodriguez’s personal and professional reputation, in South Korea,” according to the lawsuit.
On the back of these allegations, the placement agency is seeking no less than $3 million and punitive damages. Confido could not be reached for comment.
“USAA Real Estate Company is surprised and disappointed that Confido is pursuing this course of action,” a spokeswoman said. “Mr. Rodriquez did provide services for the company, for which he was compensated as agreed. USAA Real Estate Company has a 30-year track record of fulfilling our obligations to consultants and brokers, and we are confident we have done so here.”
USAA RealCo manages a variety of vehicles and mandates for global investors. In April, Bayerische Versorgungskammer (BVK), Germany’s largest public pension fund, awarded the firm a €750 million mandate to invest in core and value-add multifamily assets in the US, for example.
The firm has $18 billion of assets under management.