German Pension Funds Fueled Shvo's Rise. Now One Is Catching Heat At Home
What You Need To Know
Two years ago, off a billion-dollar shopping spree high, Michael Shvo spoke about his German investors’ eagerness to invest big — and patience to reap the benefits over time.
“Peak of Covid, I get a call from one of our pension fund investors in Germany. They asked me, ‘Is there blood on the streets?’ Everybody wants to see blood on the streets,” Shvo said onstage at a December 2021 Bisnow event. “And I said, ‘Yeah, there’s blood on the streets, but not on the streets we want to buy real estate.’”
Shvo's acquisitions were already among the most ambitious before and during the acute period of the pandemic. But at the event, he lamented that he was starting to be outbid during the peak of the record investment frenzy. Sitting next to him, Silverstein Properties’ then-CEO, Marty Burger, chuckled at the idea that anyone would pay more for prime real estate than Shvo.
“When Michael is losing bids, the end is near,” Burger said.?
Now, two years later, it seems that investor patience is wearing thin.?
The Bavarian State Parliament is questioning pension fund Bayerische Versorgungskammer for its real estate investments, especially those involving Shvo, I reported Wednesday.
“According to media reports, the Bavarian Ministry of the Interior's supreme authority Versorgungskammer (BVK) invested high three-digit million amounts directly or indirectly in luxury real estate in the USA, which was developed by a convicted tax evader,” Bavarian Parliament officials said in a letter I obtained, translated into English. “High losses are looming, forcing those responsible at BVK to explain themselves.”
Through Deutsche Finance, BVK has been one of Shvo’s biggest financial backers. And despite previously flaunting its stake in his largest real estate projects, like the Coca-Cola Building in Manhattan, The Raleigh in Miami Beach and the Transamerica Pyramid in San Francisco, the pension fund has since been anxious to clarify that it only invests in real estate indirectly and has no say in how those funds are spent.
Shvo has also fought back against allegations raised in lawsuits and any further reports of financial peril, but some cracks have started to emerge. Shvo and his backers are being pushed into a bulk sale of the 44 unsold units in their Mandarin Oriental Residences building in LA after their lender filed a notice of default on a $200M mortgage. They also had to take out a $120M inventory loan for the unsold units at the Mandarin Oriental in Manhattan.?
In a statement, a Shvo spokesperson said that the luxury developments have attracted high-paying tenants, and “the value of our commercial portfolio has increased by hundreds of millions of dollars.”
That includes the Transamerica Pyramid, which reopened in September. However, even that hasn’t been a smooth process for the developer.?
News of the building’s grand reopening was clouded with images of an airplane flying around the building with a banner that read, “SHVO MUST GO: LAWSUITS CLAIM FRAUD.” Later in the month, a window broke in the skyscraper, raining glass onto the sidewalk below.
— Sasha Jones
Send tips, love letters and hate mail to [email protected] or message me via Signal @SashaJones.06 to keep it encrypted.
What I Want To Know
Is anyone else wondering what our friend Adam Neumann is doing? Looks like pretty much the same thing.?
While rolling out his residential startup Flow, he’s also launching Workflow. That’s right, another coworking venture.?
Five years after losing control of WeWork, and just months after his bid to buy back the company out of bankruptcy was denied, he's decided to give it another go.
This time, Neumann is equipped with the same charm and arguably more chutzpah, along with a $350M investment from a16z and hundreds of millions lining his own pockets from his WeWork exit.
But maybe some landlords are excited to get back into business with Neumann? After being promised long-term leases and big rents, many have since been abandoned during WeWork’s bankruptcy, with several being sent into a financial spiral as a result, as I reported this summer.
Regardless, I’m excited about what’s next for Neumann. My curiosity about his new venture led me to do a bit of a deep dive into Flow’s website. Maybe it’s my love for print magazines, but what really drew my eye was The Flow Trip.
On the publication’s subscription page, Flow promotes “early access to Flow events, concerts, and experiences.” Sound familiar? It reminds me of WeWork’s incredibly expensive Summer Camp, which resulted in the company burning through cash and a sexual harassment lawsuit.
Maybe I’ll sign up for a subscription. But if you have any more elusive Flow materials, I am itching to learn more.
领英推荐
First Look
The New York City Football Club is continuing to roll out information about the city’s first stadium dedicated to soccer.?
Released Tuesday, the newest renderings are of City Square, a street-level area at the south end of the stadium. The area will be accessible to ticket holders on match days and to the general public at all other times, NYCFC said.?
City Square will house the Five Boroughs Food Hall and be used as a greater community event space, such as for farmers markets, festivals and music performances, according to NYCFC.
The $780M, 25,000-seat stadium near Citi Field, which was approved earlier this year, is expected to be completed by 2027. The larger 23-acre redevelopment, from Related Cos. and Sterling Equities, includes 2,500 affordable housing units, an elementary school, 80K SF of retail space, a hotel and a park.
Can I Give You My Number?
$231.4M
The amount that the real estate industry has donated so far this election cycle. My colleague Ciara Long analyzed federal campaign finance donations to understand how some of the biggest local names are putting their money where their mouth is.
They Said What??
“You can have all of our Signature loans,” Blackstone Managing Director Tony LaBarbera told Oaktree Capital Management Managing Director Katy Mao at Bisnow’s National Commercial Real Estate Finance conference.
Hang Out With Me
Bonus
If you’re reading this right now, I’m on a flight back to New York from Texas. I’m happy to report that there has been an ultimate victory in the ongoing sibling rivalry: Our city is so great that the State Fair of Texas has dedicated an entire section to it.?
Drop The Hot Goss
The Slice is produced by Bisnow Senior New York City Reporter Sasha Jones and is edited by Deputy Managing Editor Ethan Rothstein. Got an answer to my questions or info that you think I’d be interested in? I’m always happy to chat, on or off the record. Reach me at [email protected] or @SashaJones.06 on Signal, an encrypted messaging app.