The U.S. arm of a Munich-based investment management firm is accusing Germany's largest pension fund of mismanaging a nearly $2B portfolio of trophy real estate assets and trying to sidestep blame for more than $1B in losses. 

Deutsche Finance America filed a lawsuit Monday against Bayerische Versorgungskammer in Delaware Superior Court for breach of contract, defamation, deceptive trade practices and more. The complaint seeks compensatory damages from BVK to be determined through a jury trial over its alleged mismanagement of the U.S. commercial real estate portfolio and a subsequent campaign designed to blame DFA for the losses, according to a DFA press release. 

BVK invested nearly $1.9B in seven projects through a partnership with DFA and developer Michael Shvo, according to a December statement from the pension fund. The portfolio included the Transamerica Pyramid building in San Francisco that sold for $691M earlier this year, the Mandarin Oriental Residences in Beverly Hills and the Coca-Cola building in Manhattan, The Real Deal reported. 

After writing down around €163M of its investment for the 2024 fiscal year, the pension fund said it expected a further loss that could bring that total to €853M, or more than $1B.

DFA alleges in its lawsuit that BVK’s mismanagement of the portfolio included failing to approve operating budgets, refinancing decisions, maintenance and development measures, and proposed leases. The pension fund is also accused of lying about its involvement in the investments, as DFA claims that BVK controlled leasing, construction, financing, pricing and capital decisions even though it was ill-equipped to do so.  

A spokesperson for BVK said the company hasn’t been served with any complaint filed by DFA. 

“Regardless of this, BVK firmly rejects the allegations that have come to light,” the BVK spokesperson said. “Any allegations against BVK are baseless and constitute an obvious attempt by Deutsche Finance to divert attention from its own responsibility and its numerous, publicly known challenges.” 

BVK plans to use all legal means to defend itself in the interest of its members, insured individuals and benefit recipients, according to the spokesperson. 

DFA declined to comment on the suit. Law firm Quinn Emanuel Urquhart & Sullivan LLP, which filed the action on behalf of DFA, didn’t immediately respond to Bisnow's request for comment. 

BVK sought to cut ties with Shvo and DFA in February, although Shvo maintained that the investments were performing well aside from market fluctuations related to interest rate changes.

Shvo brought an arbitration case against BVK last year, claiming he was owed more than $85M in various fees. DFA also took BVK to arbitration over $31M in fees the company said it was owed for the sale of the Transamerica Pyramid building.