Key Takeaways
- • Prosecutors raided the offices of German asset manager Deutsche Finance on a Tuesday, with the firm confirming that a "third party" conducted the raid, according to Bloomberg.
- • The raid is linked to the U.S. real estate portfolio of BVK, Bavaria's state-run public pension institution that manages pensions for 2.8 million public employees.
- • Deutsche Finance reportedly acted as middleman between BVK and developer Michael Shvo, and its partners absorbed significant losses on Shvo's Transamerica Pyramid sale.
- • Cyprus-based Yoda PLC paid $691.6 million for the Transamerica Pyramid in San Francisco; Shvo and his companies received $34 million from the deal.
- • BVK has warned total losses on its seven-property Shvo-linked portfolio could reach nearly $1 billion, and the two sides are in active litigation.
Summary
Prosecutors raided the offices of Deutsche Finance, a German asset manager with ties to pension fund group BVK, on Tuesday. The alleged connection is losses tied to the sale of the Transamerica Pyramid in San Francisco. Deutsche Finance confirmed that a "third party" carried out the raid, according to Bloomberg, and said the raid was linked to BVK's U.S. real estate portfolio. Deutsche Finance is cooperating with authorities and had been in communication with them before the raid. BVK declined to comment.
Deutsche Finance reportedly served as the intermediary between BVK and developer Michael Shvo. Several months earlier, Cyprus-based investment firm Yoda PLC paid $691.6 million for the Transamerica Pyramid. Shvo and his companies, Shvo Group, Shvo Property Management and Shvo Brokerage, received $34 million from the transaction. Shvo's German partners, however, absorbed significant losses. BVK had earlier warned that total losses on its seven-property portfolio tied to Shvo could reach nearly $1 billion.
Prosecutors are investigating allegations that Deutsche Finance offered bribes to BVK officials, according to a local German news outlet, though investigators have not confirmed this. Two senior BVK managers reportedly left the fund following an internal investigation that included allegations of luxury trips.
The two parties have been in litigation since the sale. Deutsche Finance America sued BVK in May, claiming BVK "broke investment rules," acted "underhandedly," and obstructed operating budgets, maintenance decisions and proposed leases across its U.S. portfolio. In August, Deutsche Finance America filed a further suit alleging defamation, deceptive business practices and breach of contract, and claiming BVK illegally exercised direct control over "leasing, construction, financing, pricing and capital decisions" despite German law requiring public pension funds to remain passive investors. The suit concerns a $2.3 billion U.S. real estate portfolio. BVK has rejected the allegations as "unfounded" and has distanced itself from the arbitration.
Deutsche Finance reportedly served as the intermediary between BVK and developer Michael Shvo. Several months earlier, Cyprus-based investment firm Yoda PLC paid $691.6 million for the Transamerica Pyramid. Shvo and his companies, Shvo Group, Shvo Property Management and Shvo Brokerage, received $34 million from the transaction. Shvo's German partners, however, absorbed significant losses. BVK had earlier warned that total losses on its seven-property portfolio tied to Shvo could reach nearly $1 billion.
Prosecutors are investigating allegations that Deutsche Finance offered bribes to BVK officials, according to a local German news outlet, though investigators have not confirmed this. Two senior BVK managers reportedly left the fund following an internal investigation that included allegations of luxury trips.
The two parties have been in litigation since the sale. Deutsche Finance America sued BVK in May, claiming BVK "broke investment rules," acted "underhandedly," and obstructed operating budgets, maintenance decisions and proposed leases across its U.S. portfolio. In August, Deutsche Finance America filed a further suit alleging defamation, deceptive business practices and breach of contract, and claiming BVK illegally exercised direct control over "leasing, construction, financing, pricing and capital decisions" despite German law requiring public pension funds to remain passive investors. The suit concerns a $2.3 billion U.S. real estate portfolio. BVK has rejected the allegations as "unfounded" and has distanced itself from the arbitration.
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