The idea was to take San Francisco’s most recognizable building — iconic if a little faded — and reinvent it for the new age.
Were Michael Shvo only measured by that standard, then his $1 billion bet on the Transamerica Pyramid in 2020 would be deemed a success. The 53-year-old developer’s redesigns enticed some of the city’s most expensive office tenants, and the renewed 5,000 square foot public redwood grove became a destination for locals and tourists alike.
But the price tag for the wholesale makeover always loomed overhead. While the commercial real estate market around the Pyramid was cratering due to the pandemic, Shvo and his investors paid top-dollar for a project as if they were operating in a different world — a characterization he embraced. “I have the No.1 building in San Francisco,” Shvo told The Standard when his audacity was the toast of the town. “We’re creating a product that is unique and expensive,” he said. “The people who can afford it happen to be at the top of their industries. That’s the inherent DNA of the Shvo universe.”
He gave the same pitch to his investors — Bayerische Versorgungskammer (BVK), Germany’s largest public pension group, and Deutsche Finance, a private equity real estate investor — when he met them in 2018, after pleading guilty to tax evasion (opens in new tab).
At the time, interest rates were low and office demand was high, so the German entities were keen on buying more U.S. real estate. Shvo convinced them he was the man to do the deals. Together, they embarked on a two-year buying spree, spending nearly $3 billion on trophy assets such as the “Big Red” skyscraper in Chicago, the Raleigh Hotel in Miami, the Coca-Cola building in New York, and finally, the crown of San Francisco: the Transamerica Pyramid.
Deutsche Finance America, with financing from BVK, purchased the Transamerica Pyramid for $650 million. | Source: Camille Cohen/The Standard
Shvo justified the purchases, and the subsequent spending on exquisite renovations, by explaining that his investors were in it for the long haul. They would not be swayed by turbulence in the real estate market. He deflected questions about profitability by pointing to record-breaking leases, the new restaurants that were coming, and praise from local officials (opens in new tab) in San Francisco for reinvigorating the iconic building.
“We’ve created an unbelievable income stream,” Shvo said of the Pyramid.
What he didn’t say was that his relationship with the Germans had been splintering for years.
It started in 2020 when his former friend and business partner Serdar Bilgili — who had introduced him to the Germans — wrote a letter to BVK’s head of real estate, Rainer Komenda. Bilgili warned that Shvo had a penchant for overcharging on fees and using investment dollars for personal leisure. Shvo has denied those allegations.
According to reports in the German media (opens in new tab), that letter was suppressed by Komenda until he was dismissed by BVK last summer. The letter only came to light during a lawsuit he filed against his former employer for wrongful termination.
By 2023, the same year construction workers began remodeling the Transamerica Pyramid, BVK started slowing down its investment in Shvo’s projects. The group halted new investments, although additional money was spent to maintain existing assets. During this time, it became clear that sales at his luxury condo projects in Beverly Hills and Manhattan were slower than what he had advertised to his investors, back when he convinced them to spend on lavish launch parties with celebrity appearances.
Shvo said his admiration for the Transamerica Pyramid started when he visited San Francisco with his parents as a child.
Things eroded further in 2024 when Shvo was sued by Core Club, alleging fraud. The elite, members-only club, based in the Coca-Cola building in New York, had signed a deal to open another club in Shvo’s Pyramid. The location never opened, and the parties remain locked in overlapping lawsuits.
That same summer, BVK commissioned an internal report that identified several compliance violations pertaining to business dealings with Shvo. The documents, which were read aloud in a German court, detail “inappropriate close relationships among individual actors” that suggest conflicts of interest across the partnership. Citing sources familiar with the matter, Bloomberg recently reported (opens in new tab) that those relationships included a younger relative of Komenda who had internships at Deutsche Finance and Shvo’s eponymous firm.
Last year, several of Deutsche Finance and BVK’s investments with Shvo started coming up bust. First, the Raleigh Hotel was sold (opens in new tab) while renovations were still underway. Another project at 9200 Wilshire Blvd. in Beverly Hills sold for a massive discount (opens in new tab).
By the time the numbers had been tallied up, which include ongoing operating expenses across the U.S. investments, BVK told its 2.7 million pension holders that it expected more than $1 billion in losses. More of Shvo’s intermediaries with the Germans would soon depart, including Komenda’s boss, Norman Fackelmann, and Deutsche Finance exec Jason Lucas, who was listed on many of the joint venture deals with Shvo.
In a letter dated Jan. 19 of this year, BVK told its members the losses were due to “economic challenges” associated with losses, as well as “project partners” that “did not meet expectations placed upon them.” As a result, the pension fund was “systematically work[ing] through” investments made between 2018 and 2020, the period when Shvo guided BVK leaders to purchase multiple properties.
Working through those investments culminated this week in the agreed upon sale of the Transamerica Pyramid to Yoda PLC, an investment firm based in Cyprus. The deal, which is expected to close later this year, will see Shvo removed as the property’s operator.
Shvo issued a statement on Tuesday in light of the deal. “It has been a privilege to serve as steward of one of the world’s most iconic skyscrapers,” he said. “Through a hospitality-led vision … we transformed the property into a world-class office destination defined by service, experience, and cultural vitality.”
“I am confident it will continue to define the skyline and serve generations to come under its next custodian,” he added.
In the end, the Pyramid was indeed reinvented. It just wasn’t Shvo who got to keep it.