Core Club Lawsuit Over Transamerica Pyramid Space Could Cost Shvo Nearly $180M In Rent
New details have emerged on the terms of Core Club’s 45K SF Transamerica Pyramid lease and how much billionaire developer Michael Shvo would lose if it was rescinded as part of a legal proceeding in New York.
The San Francisco Business Times reported Wednesday that Shvo and his affiliates could lose $178M over 20 years if the New York Supreme Court grants Core Club’s request to rescind its lease. The members-only club hasn't taken occupancy and hasn't started paying rent on its space.
For the first three years, Core Club’s base rent for three floors and a portion of the basement is $8M, with rents escalating annually after that, according to the Business Times.
Core Club was also slated to receive a construction allowance not to exceed $22M, according to a July 22 court filing.
However, Core Club alleged that the build-out has yet to occur.
“The promised build-out for CORE: at the Transamerica building has yet to begin. This delay speaks volumes about the challenges we've faced in this situation,” Core Club’s attorney Adam Glassman told Bisnow in a statement.
A Shvo spokesperson said construction on the space has already begun, but Core Club owes the owners $18M to complete the build-out.
The $1B renovation of the iconic 512K SF tower is otherwise going as planned, the spokesperson said. Reopening is scheduled for Sept. 12, as originally intended.
Glassman said the Core Club plans to set up a club in San Francisco, just not at the Transamerica Pyramid.
In late June, Core Club founders Jennie and Dangene Enterprise filed a $600M lawsuit in New York alleging Shvo deceived them into signing a deal that would allow him to seize a 50% stake in their company and finance expansions at three locations. They included the $100M expansion of its Transamerica space, along with its New York headquarters at 711 Fifth Ave. and a building in Milan.
The suit says Shvo didn't have the money to fund such improvements, but it would be funded by Bayerische Versorgungskammer, the true owner of the building.
Core Club's suit claims that BVK is the true owner of Shvo’s largest properties. The Bavarian fund said in a statement that it holds shares in a fund that invested in the properties but doesn't invest in Shvo directly.
In the July 22 motion, Shvo and his affiliates said the suit is an attempt by Core Club to recover lost revenue from the public’s lack of interest in joining the members-only club.
“Plaintiffs’ lawsuit is a desperate attempt to avoid their clear contractual obligations contained in a series of arms-length, heavily-negotiated written agreements for the purposes of expanding their ‘ultra-luxury’ private-club business,” the motion says.
The motion also says the plaintiffs “received tens of millions of dollars in funding to build out two new clubs.”
“Unfortunately, they have proven incapable of paying back their debts, building out their clubs within budget, or attracting enough members to achieve success.”
