Shvo Lays Off Miami Staff As Hurdles Mount For Ambitious Projects

Michael Shvo’s eponymous development firm is scaling back operations in South Florida despite having two projects in the early stages of construction.

Shvo is down to four full-time office staff in South Florida after several employees were laid off last week, Bisnow has learned.

The terminations — announced at a staff meeting on Wednesday, multiple sources said — were the latest in a series of departures from Shvo's Miami-based team that once numbered around a dozen people.

The New York-based developer's remaining staff is there to oversee two high-profile developments in Miami Beach, both of which are facing unique challenges. 

Jerry Piro, Shvo's head of design, development and construction, said in an interview Monday that the staffing changes were a strategic pivot as the company moves past the design phase and into construction of its South Florida developments.

At least two of the employees who lost their jobs were on the design team, along with the front desk assistant to all the staff in the South Florida office, Piro confirmed.

“Our core staff is almost more doing the fiduciary thing,” Piro said. “We're making sure that everybody is doing what they're supposed to do, and we’re not paying a penny more than what anybody's entitled to be paid. Our jobs become more of a control system.”

Shvo's flagship Miami project is the restoration and redevelopment of the historic Raleigh hotel in Miami Beach, adding a 17-story condo tower with 44 ultra-luxury residences on the same site.

Shvo, in a partnership with Deutsche Finance America, announced plans for the project in May 2022. More than two years later, the property sits mostly idle, with the historic hotel boarded up and facades that need to be preserved propped up by metal bars. 

BH3 Management provided a $190M construction loan for the property last July that also paid down original financing from ACORE Capital. The loan matured last month, but BH3 granted Shvo a six-month extension that could be pushed further out, a BH3 spokesperson said. 

“The loan is current and it's in good standing,” the spokesperson said. “The loan did reach its initial maturity and was further extended by mutual agreement.”

The Raleigh is being marketed as a cut above the opulence that already pervades luxury development in Miami Beach, and that strategy is testing the project’s viability, The Wall Street Journal reported in June.

Shvo is offering units at the project for north of $5K per SF — the developer told Bloomberg he expects to sell a 13K SF penthouse for $150M — while most new developments on the island are priced below $4K per SF.

The developer is also known for putting buyers through an intrusive vetting process that includes questions about family members and professional contacts, the WSJ reported. The process, while not unheard of in New York City, still raises eyebrows in Miami. 

Shvo has presold more than a quarter of the 44 units in the project, according to a source familiar with the development. Piro said they have more than $250M in signed contracts.

Official Partners was the exclusive sales agent until last month, when multiple rape allegations against Official’s co-founders, first reported by The Real Deal, prompted Shvo to bring The Raleigh's condo sales in-house.

Fort Lauderdale-based BH3 is committed to seeing The Raleigh returned to its former glory and seeing the project through fruition regardless of Shvo’s ability to execute, said a person familiar with the debt who wasn't authorized to speak publicly.

Shvo plans to begin vertical construction before the end of the year and intends to reopen the hotel by the end of 2025, Piro said. He declined to disclose a timeline for the condo tower and said the hotel’s historic protections have made moving ahead a painstaking process.

“We can't touch a doorknob without talking to 20 different agencies and getting everything approved,” Piro said.   

An aerial photograph of the site provided to Bisnow shows what appears to be material that has been delivered and soil prepared for construction, but the site doesn't appear to be actively under development. 

A crane briefly appeared on the site this month before being removed. Piro said it was hauled off because a change in contractors necessitated a change in permits that has since been completed.

Piro acknowledged that the pandemic had pushed the timeline of the project back but said the developer is satisfied with the pace of sales.

“We're back on track to do the project as it was designed and make sure that it financially works for everybody,” Piro said. 

Shvo’s second major project in Miami Beach is a six-story office building with ground-floor retail called The Alton, planned a half-mile away from The Raleigh on Lincoln Road. 

Miami Beach officials in December approved the project, which would replace one- and two-story commercial buildings with 170K SF of office space, 17K SF of ground-floor retail and five luxury residences.

As it prepared to launch the project, Shvo was courting JPMorgan Chase to open a private wealth management office spanning two floors at the property, according to documents reviewed by Bisnow. 

Shvo and JPMorgan officials met at least once in 2022 to discuss the potential deal, according to the documents, but the bank ultimately opted not to move ahead. Instead, it announced in June that it would add 80K SF of office space to its footprint at 1450 Brickell Ave. in Miami’s financial district.

Piro denied that JPMorgan was expected to take the space, saying Monday that Shvo had conversations with more than a dozen prospective tenants at the property before it was announced. 

Shvo has yet to formally launch leasing efforts at The Alton, which Piro said are expected to kick off early next year. He acknowledged that tenant footprints in Miami have shied away from full-floor leases and toward smaller boutique spaces, and as a result, the development firm is weighing minor design modifications to accommodate smaller suites. 

Demolition of the existing structures is scheduled to begin early next year, Piro said. Shvo hit some hurdles after discovering critical infrastructure managed by Florida Power & Light under the property that the developer has been negotiating with the utility to move. 

“We've been trying to get them to move stuff onto the other side of the alley, which has not been well received,” he said.  

The Foster + Partners-designed project is a partnership with Deutsche Finance America, which together with Shvo acquired the site in June 2022 for $39M. Construction financing for the project hasn't been announced.

Shvo culled its staff in Miami as it battles a $600M lawsuit in New York from a tenant at two of his high-profile properties.

Core Club, a members-only hangout with locations in New York and Milan, sued Shvo for fraud in June, alleging that it was deceived with “tales of grand expansion” in San Francisco and beyond. 

Core's founders accused Shvo of deficiencies in the build-out of its space on Fifth Avenue in Manhattan and claimed he racked up $80K in unpaid fees for using the space in his building despite never having been a member. They also claim that he agreed to invest $100M toward their expansion but undermined their business to exercise a clause in their contract that would allow him to take over a 50% stake in Core Club.

The elite club agreed to open a location at Shvo’s Transamerica Pyramid in San Francisco but now alleges that there “is no realistic prospect” of the club opening “in September 2024 or any time in the foreseeable future” because of a lack of progress on building out the space.

Shvo has denied Core Club's allegations, slamming their suit as a “cynical ploy” for reduced rent.

The allegations led Bayerische Versorgungskammer, Germany’s largest public pension group and Shvo's largest backer, to publicly distance itself from the developer. BVK has invested in Shvo's properties, including The Raleigh, through an independent manager that placed funds with Deutsche Finance America.

“We distance ourselves in every respect from the illegal and dishonest business conduct that is presented in the lawsuit,” BVK said last month in a statement.