Shvo's German Backer Says Alleged Behavior In $600M Core Club Lawsuit 'Illegal And Dishonest'

Germany's largest pension group, which has helped finance Michael Shvo’s projects through a managed fund, has spoken up in light of the swarming legal and public relations headaches surrounding the ambitious developer.

Bayerische Versorgungskammer was named as a defendant in a $600M lawsuit by Core Club, in which the members-only club accused its landlord, Shvo, of fraud for trying to execute a hostile takeover of the business and using its services without paying.

Core Club's suit claims that BVK is actually the owner of Shvo’s largest properties, but the Bavarian fund said in a statement this week that it holds shares in a fund that invested in the properties but doesn't invest in Shvo directly.

“The BVK has no relationship with Michael Shvo, the Core Club or the managing director Jennie Enterprise with regard to the issues in dispute,” the investor said in a statement, translated from German. “We distance ourselves in every respect from the illegal and dishonest business conduct that is presented in the lawsuit.”

The founders of Core Club, Jennie and Dangene Enterprise, say Shvo deceived them into signing a deal that would allow him to seize a 50% stake in their company. He also allegedly agreed to fund a $100M expansion but reneged on that promise. 

The suit claims Shvo didn't have the money to fund such improvements, but it would be funded by BVK, the true owner of the building.

BVK said that it is not the owner of the properties and has no involvement in the management of the funds. In an additional statement to Bisnow, BVK specified that its capital management company, Universal-Investment-Luxembourg S.A., has invested independently in a target fund launched by Deutsche Finance Group.

The investment management firm then acts as a third-party alternative investment fund manager, with other institutional investors involved.

Deutsche Finance “works to our knowledge together with Michael Shvo on a project-related basis,” BVK told Bisnow.

In the statement, BVK said that its lawyers are examining the lawsuit, but that it “cannot imagine any basis on which a corresponding lawsuit against BVK would be successful.”

"We fully agree with BVK's statement — Core's lawsuit is completely flawed and frivolous, including its inclusion of BVK, and we will soon show that it's nothing more than a desperate last-ditch attempt to avoid their clear and unequivocal contractual obligations," a spokesperson for Shvo said. 

BVK's investment mechanism is not specific to Shvo or the pension fund. Due to various regulations, foreign investors often must use other investment vehicles. 

Both Shvo and Deutsche Finance have acknowledged BVK’s investment throughout the years.

In an article on Shvo’s website, BVK is listed as an investor and partner for the $956M purchase of a majority interest in 711 Fifth Ave. — highlighted in Core Club’s lawsuit — and the $382M acquisition of 530 Broadway. Also included is Deutsche Finance as well as Bilgili Holding, a company managed by Shvo’s former partner, who has since sued the developer over the Aman New York at 730 Fifth Ave.

In another release announcing the acquisition of San Francisco’s Transamerica Pyramid, Deutsche Finance America once again named BVK as its main backer. 

“SHVO and Deutsche Finance America acquired the properties together with a group of European investors anchored by Bayerische Versorgungskammer,” the statement said.

In June, Business Insider reported that Shvo’s multibillion-dollar buying spree has been funded by BVK, which manages $120B of assets, and investment firm Deutsche Finance. With their backing, Shvo scooped up roughly $3B of U.S. property, according to the publication.

Shvo has created a reputation for creating exclusive and high-end properties, the kind that is often a draw for foreign investors. However, the Core Club lawsuit alleges that Shvo has fallen short of those standards. 

Core Club's founders also claim that he mismanaged the build-out of their space at 711 Fifth Ave., the former Coca-Cola Building, exceeding cost projections, failing to secure a certificate of occupancy and delivering suites and kitchens riddled with defects.

Further, they say he hosted gatherings and parties for his family and children's school at the club without ever being granted a membership, racking up an $80K unpaid tab.

The accusation echoes a similar one made at his Mandarin Oriental condominium project at 685 Fifth Ave. close by — another project funded by BVK through a construction loan provided by Deutsche Finance, according to a 2019 release.

Shvo is being sued by a resident of the Mandarin Oriental, John Goodman, who claims the developer failed to deliver on contractually promised specifications in a $6M condo sale. The lawsuit also alleges that Shvo himself exhibited “unprofessionalism to an alarming degree” through the use of “foul language” and “toxic conduct.”

Separately, Goodman has also accused Shvo of throwing parties for his friends and families at 685 Fifth Ave., treating the branded Mandarin Oriental Residences as a “Holiday Inn Express” and violating the building’s community standards, according to letters signed by Goodman's lawyer that were obtained by Bisnow.

In one cited instance, on June 4, Shvo hosted a private concert by Greek singer Antonis Remos in the building's restaurant. The concert occurred outside of the restaurant’s permitted hours, going into the early morning, and the music could be heard throughout the building, according to a June 18 letter.

“The reality is that this concert was nothing more than a boisterous party thrown by Mr. Shvo for his own amusement, with no regard for the rules or the comfort of the building’s actual residents,” the letter said.

In addition, Shvo has allegedly housed friends, family and other acquaintances in sponsor units and hosted a children’s party at the condo’s rooftop pool on June 8, according to the letters.

Goodman claims Shvo's alleged actions are “a direct threat to the value, reputation and integrity” of his own property. 

Representatives for Shvo dismissed Goodman's claims in both the lawsuit and the letters.

“This is a shameless attempt to use the courts and the press to extort money by an individual with a history of frivolous lawsuits,” a spokesperson said of Goodman's complaints. “Our developments are best-in-class and this is the only complaint of this nature at the property.”