Developer Michael Shvo plans bulk sale of Mandarin Oriental condos after default

Beverly Hills, California

Michael Shvo, who shot to prominence in recent years buying billions of dollars of trophy real estate assets, has defaulted on the debt connected to a luxury condo building in Los Angeles.

In a notice filed with the Los Angeles Recorder’s Office on August 21, the lender Acore Capital said that a Shvo-controlled entity, BSD Beverly Hills Propco, owed roughly $200 million tied to 9200 Wilshire Blvd. in Beverly Hills.

The notice stated that it could allow Acore to initiate a foreclosure sale within three months.

The site was purchased in 2019 by a group of investors that included Shvo, Bilgili Group, and Deutsche Finance. The Munich-based pension system, Bayerische Versorgungskammer – one of Europe’s largest retirement vehicles – was an investor in the deal, according to an announcement at the time.

Serdar Bilgili, the chief executive of Bilgili Group, later had a falling out with Shvo and exited the partnership.

Fewer than 20% of the units at the property, which is branded and managed by the luxury hotel chain Mandarin Oriental, have been sold since sales began more than two years ago, according to a statement from a Shvo spokeswoman.

In the statement, the Shvo spokeswoman said that the ownership group would seek to sell the property’s 44 remaining unsold apartments in a bulk deal with a buyer. It has hired the real estate services firm Newmark to market the offering to investors and arrange a transaction.

“The decision allows the partnership to re-allocate investment resources to purchase new income producing assets, in anticipation of a lower interest rate environment,” the spokeswoman said.

A spokesman for Acore declined to comment.

A representative for BVK, as Bayerische Versorgungskammer is known, declined to comment on the default or on the sale plan, citing reasons of confidentiality. The representative said in an email that “our investment in this real estate in question has been indirectly and in accordance with the German regulations applicable to us for investments in foreign projects.”

BVK, the email said, “only holds shares in a fund that is itself invested in the corresponding real estate indirectly and only together with other investors.”

The default is the latest in a series of setbacks for Shvo and his German investors, including BVK, after a spending spree that took off in 2018.

Shvo purchased $3 billion of prominent real estate assets, including the Transamerica Pyramid building in San Francisco and 711 Fifth Ave. in Manhattan. BVK, a collection of pension funds that manages 111.9 billion euros, served as a financial backer in those deals.

But office vacancies in his portfolio have since opened, while sales have been slow for his high-end condos.

A person with knowledge of the effort to sell the Beverly Hills apartments said that Shvo and his partners were seeking slightly more than $2,000 per square foot for the apartments, a nearly 30% discount below what the units had recently been listed for individually. The person was granted anonymity because he was not authorized to discuss the sales effort.

The offering would likely appeal to investors who see the opportunity to buy at a discount, then seek to sell the units one-by-one to conventional homebuyers at a profit.

A legal complaint filed by Biligili against Shvo in 2020 indicated that BVK initially had the most at stake financially in the project. A chart filed as part of the allegations displayed what it said were the initial investments in the 9200 Wilshire Blvd. project. The chart claimed that BVK had contributed roughly $73 million, amounting to roughly 80% of its equity.

BVK in its email said that number was incorrect, but declined to say what its share of the property is. “We cannot comment on detailed information about our investments – also for reasons of confidentiality towards our co-investors, business partners, and service providers,” the email said.

The Beverly Hills condos are not Shvo’s only headache. Two parties have recently sued him: a buyer of a $6 million apartment at a Mandarin Oriental branded condo building at 685 Fifth Ave. in New York, and the Core Club, a high-end wellness and events space that operates a location at 711 Fifth Ave.

Shvo has sought to dismiss the 685 Fifth Ave. lawsuit and has called the Core Club suit “a desperate attempt to avoid their clear contractual obligations”

BVK, meanwhile, has been named as a defendant in some of the litigation that has sprung up at the two properties.

In a previous statement regarding the lawsuit filed by the Core Club, a spokesman for BVK said that it “remains convinced that there is no legal basis for naming BVK” in the case.

BVK has also stated it “has no legal or contractual relationship with Shvo.” In previous statements, a spokeswoman explained that BVK’s investments with Shvo were handled through intermediaries, including Deutsche Finance and another German financial firm, Universal Investment.