Shvo's Multibillion-Dollar Plans For Opulence Start To Show Cracks
Michael Shvo has built his brand on exorbitant luxury. So much so that he is reportedly struggling to find people willing to pay his prices.
After going on a $3B shopping spree, acquiring and rehabilitating some of the most acclaimed properties across the country, he is struggling to fill his buildings, and investors are turning away from the developer’s promises, The Wall Street Journal and Business Insider reported separately Thursday.
“I wake up in the morning for one purpose — to elevate super prime real estate,” Shvo told the WSJ. “With that comes vacancy. With that comes slower sales pace. But that’s OK. The end result is that the buildings are worth a lot more money at the end of the day.”
In 2020, Shvo acquired the Transamerica Pyramid in San Francisco and two other buildings for $650M, then poured another $250M into renovations. Shvo told the Journal that the building is the second most expensive in America, signing leases between $200 and $250 per SF.
Bisnow previously reported that Shvo rapidly raised the prices on the property following its rehabilitation, more than triple that of San Francisco’s average asking rate.
But the property is only 50% occupied, according to CoStar data. It has also lost tenants, including private equity firm Thoma Bravo and Citizen Financial Group’s JMP unit, and Northwestern Mutual is also considering moving, the WSJ reported.
Shvo said some tenants departed because they didn’t fit “the right profile” for the building and “just can’t economically afford it.”
The members-only Core Club was also supposed to open in the project, but a spokesperson for the company told the WSJ that it “is not interested in doing any more projects with Michael Shvo.” The two are reportedly in a dispute over payments promised to Core at its Fifth Avenue location.
Shvo is also seeing tenants leave other office properties, according to BI.
At 711 Fifth Ave., its largest tenant, Truist, left last year, though a spokesperson told BI that the space has largely been filled since. At 530 Broadway, Anomaly, which occupies almost half of the building, is set to exit soon.
At 333 South Wabash in Chicago, Akuna Capital’s lease will expire by 2029. The tenant occupies 55K SF of the tower and is reportedly looking for office space elsewhere.
Shvo’s condo projects have also been a tough sell for potential buyers.
At 685 Fifth Ave., a 69-unit Mandarin Oriental-branded project in Manhattan that Shvo and his partners acquired in 2023, just 14 units have sold and two more are under contract. Shvo’s backer, German fund BVK, hired Corcoran Group to conduct a study on the project, BI reported.
Corcoran CEO Pam Liebman told BI it isn't unusual to be tapped by a partner but added that the project’s apartments are likely worth “much less than what's being asked.”
At the Raleigh on Miami Beach, for which Shvo and partners Deutsche Finance America and a group of German institutional pension funds took out a $190M loan with a debt opportunity fund last year, there are also few prospective buyers, BI and the WSJ reported.
Shvo announced that the penthouse would cost more than $150M, among the most expensive in Miami, and to prequalify for an apartment, buyers would have to answer a list of extensive personal questions. BI reported that Shvo recently cut the vetting process.
Shvo still plans to build more. In December, he received approval for a 170K SF mixed-use development in Miami Beach.
