German Pension Fund Seeks To Exit Shvo Relationship As Losses Mount

Germany's largest pension fund may be reversing course on its decision to back developer Michael Shvo as it warns that its investments are likely to result in heavy losses.

Bayerische Versorgungskammer invested a total of €1.6B, or nearly $1.9B, in seven projects through a partnership with Deutsche Finance America and Michael Shvo, the pension fund said in a December statement. After previously writing down approximately €163M of its investment, the pension fund announced that it expected another €690M hit. That means losses could total €853M, or more than $1B. 

The properties into which BVK invested retirement funds include a flashy hotel redevelopment in Miami that stalled during construction and was subsequently sold off, along with several Manhattan properties and the acquisition and renovation of the Transamerica Pyramid in San Francisco.

Now, BVK is looking to cut ties with Shvo and DFA, which served as an intermediary between the pension fund and the developer, according to reports by the San Francisco Chronicle and Bloomberg.

“The SHVO properties are demonstrably outperforming the market by achieving record rents with blue-chip tenants,” a spokesperson for Shvo told Bloomberg in a statement. “Fluctuating market valuations on paper shift with interest rate changes just like all other real estate, and BVK has acknowledged that clearly. We are not privy to the details of their internal accounting practices, but do know the SHVO properties' ongoing financial performance cannot accurately be described as anything other than success.”

Shvo recently signed a 4K SF lease with Tiger Global Management in the Transamerica Pyramid for $300 per SF, which Shvo touted as a West Coast record. The deal brings the tower to 85% leased.

BVK's investment in Shvo was less than 1.4% of capital spent at the end of 2024, and the fund has emphasized that the potential loss from the partnership would only equate to approximately 0.6% of its holdings. Due to its diversification and returns from other assets, BVK said there was no impact to pension benefits to its nearly 3 million members and beneficiaries, according to a statement translated into English using Google Translate.

In another announcement on Jan. 15, the pension fund said that, according to preliminary figures, its capital-weighted net return for 2025 will be approximately 3.4%. Its CEO, Axel Uttenreuther, said in a statement this month that BVK is systematically addressing its challenged U.S. real estate investments in a process that began last year.

BVK said it is specifically reviewing investments made between 2019 and 2020, when Shvo went on a multibillion-dollar buying spree that was primarily backed by BVK. The review was sparked by a Bavarian State Parliament investigation that began in 2024.

Rainer Komenda, BVK’s long-serving head of real estate investment management, left the pension fund last year. He was followed by Norman Fackelmann, who reported directly to Komenda, according to Munich-based tabloid Abendzeitung, which broke the news of the venture’s losses.

On Monday, BVK announced that it has appointed Andreas Steimel, the former chief operating officer of Pimco Prime Real Estate, to head its real estate investment division for a transitional period.

Jason Lucas was in charge of the Shvo relationship at DFA and has since left the company, a Denver-based subsidiary of Munich-based Deutsche Finance Group.

Komenda, Lucas, Shvo and Deutsche Finance executive Sven Neubauer would often meet in high-end hotels on business trips or dine at exclusive restaurants, like Casa Tua in Miami, Polo Bar in Manhattan or Koi in Munich, Bloomberg reported, citing anonymous sources. BVK's investments were supposed to be made at arm's length, and it previously denied any relationship with Shvo.

In a statement to Bloomberg, BVK declined to comment on individual employees or allegations but said that an internal review found violations by a former senior employee, including “inappropriately close relationships with business partners.”

A lawyer for Komenda told Bloomberg that “the majority of the facts that you claim to have researched are inaccurate and, in some cases, have been taken out of context,” but added that his client could not comment further due to ongoing labor court proceedings. 

In August, Deutsche Finance Group appointed a new firm, Revetas Capital, to manage a $4B U.S. real estate portfolio that includes the Shvo properties.

BVK was instrumental to Shvo’s comeback as a real estate power player. In 2016, the residential broker-turned-developer was charged by the Manhattan district attorney with evading taxes on purchases including fine art, jewelry, furniture and a Ferrari 458 Spider. In 2018, he pleaded guilty, agreeing to pay $3.5M in taxes and penalties.

But less than two years later, he was shopping for nine-figure commercial real estate deals backed by German pension fund capital. In partnership with DFA and BVK, Shvo paid $937M for the Coca-Cola Building at 711 Fifth Ave. in Manhattan, $650M for the Transamerica Pyramid in San Francisco, and $376M for 333 South Wabash, long known as Big Red, in Chicago.

At 711 Fifth Ave., Shvo, DFA and former partner Serdar Bilgili would receive a yearly asset management fee, leasing and property management fees, and potential carried interest paid every three years, depending on appraisals, Bloomberg reported, citing an internal document. It is unclear if other properties had a similar fee structure.

The fees later became a sore spot between Shvo and BVK when the developer brought an arbitration case against BVK, claiming he was owed more than $85M. 

At the same time, some projects have struggled to capture demand. Most recently, condo prices were cut by 20% on average at the Mandarin Oriental-branded residences at 685 Fifth Ave. At the Mandarin Oriental development in Beverly Hills, 44 units were sold in a bulk sale in 2024 after the project’s lender filed a notice of default.

The relationship between the BVK and Shvo was highlighted by the owners of Core Club, who accused the partnership last year of a fraud scheme in violation of the Racketeer Influenced and Corrupt Organizations Act. 

The private club's owners claimed that BVK funded a $50M settlement between Shvo and Bilgili following their falling out. Bilgili had allegedly written a letter to Komenda, raising concerns over Shvo’s spending, but that letter was never delivered to BVK higher-ups, according to Bloomberg, which reviewed the document.

Lawyers for Shvo previously said Core Club’s lawsuit is an “illegitimate effort to put lipstick on a pig” after the developer sued to evict the club over its failure to pay $3.3M in rent. A judge ordered the club to pay rent last year but barred Shvo from evicting it.