First a tenant of the Transamerica Pyramid in San Francisco sued its owner for fraud. Now landlord Michael Shvo has countersued, claiming CORE Club is “incapable of paying back their debts.”
The lawsuit filed by the New York-based landlord asked a court to dismiss allegations brought by the members-only club against Shvo and his partners last month, including alleged fraud in connection with the club’s lease at 600 Montgomery Street, in the Financial District, the San Francisco Chronicle reported.
The CORE lawsuit also included allegations regarding Shvo’s buildout of the club’s planned new location in the 48-story spire the partners bought in 2020 for $650 million.
After the purchase, Shvo announced a large-scale renovation, bringing the partners’ total investment to $1 billion.
The lease with CORE Club appeared to be a pillar of the pyramid’s ongoing revitalization and strategy to draw new office tenants, according to the Chronicle. The size of the club was not disclosed.
Its lawsuit now seeks a court order declaring its 20-year lease to be “null and void.”
The club, which charges membership fees of up to $100,000, alleged that Shvo promised $100 million to fund the opening of three new locations, including the one in San Francisco.
Instead, the landlord deceived the club into signing leases with “exorbitant rents” and inking a $1 million loan agreement that resulted in Shvo obtaining partial ownership in the CORE Club business for just $1, according to the complaint.
In his countersuit filed in New York, Shvo hit back.
Not only were the club’s founders “cash strapped,” according to his complaint, but Shvo alleges CORE Club had mounted a “public hit job” after failing to live up to its “contractual obligations” in order to pressure him into granting a “rent reduction, a lease rescission and other unwarranted concessions.”
In his lawsuit, Shvo argues that the club is facing a $10 million claim for construction buildout costs in New York and a nearly $19 million claim in connection with the buildout of its San Francisco location, and that its default on the loan agreement is now pending in New York State Court.
“In retrospect, it is clear that Core Club’s founders — Jennie and Dangene Enterprise — sold defendants (Shvo and his partners) on an illusion, spent other people’s money with no regard to budgets or binding agreements, and now they are shocked to find they are accountable to pay their bills,” Shvo’s lawsuit alleges.
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Adam Glassman, the club’s attorney, described Shvo’s motion to dismiss the club’s lawsuit as a “predictable attempt to avoid accountability for his actions and to delay the legal process” in what is not “an isolated incident.”
“Mr. Shvo has a documented history of engaging in questionable business practices, including deceiving residential buyers, commercial tenants and suppliers,” Glassman told the Chronicle. “He consistently over-promises and under-delivers, leaving a trail of financial ruin and broken trust in his wake.”
Glassman said that Shvo “presented himself as a trusted partner” to the club, then “used this position of trust to enrich himself at their expense.”
— Dana Bartholomew