Transamerica Pyramid complications and Bay Area office questions

When a name is pried off a building’s facade, it often indicates finality. Yet, around the same time that Michael Shvo’s name came down from the entrance of San Francisco’s Transamerica Pyramid, it showed up in a court filing that raised new, “grave questions” around the embattled New York developer’s role in the iconic skyscraper’s sale.

In March, the spire-shape commercial tower changed hands from a high-profile partnership between institutional German money and Shvo, to a Cyprus-based investment firm, named Yoda PLC, making its foray into U.S. real estate. Yoda paid Bayerische Versorgunskammer (BVK) — the manager of Germany’s largest public pension fund — $692 million for the pyramid and a pair of nearby properties. They then paid Shvo, who operated as asset manager, a separate $34 million in fees related to both his termination and his role in brokering the sale.

The sale came at a significant hit for investors, who bought the pyramid for $650 million in 2020 and pumped $250 million into a full-scale renovation. Another public pension fund in Hesse, Germany lost its entire $67 million investment in the property.

Yet, a new filing in a lawsuit over the sale claims Shvo was actually paid more than double that original fee, while another partner got stiffed. Deutsche Finance America, the U.S.-based subsidiary of a Munich firm brought on as a third prong in the Transamerica Pyramid’s operation, claims it received no payment and is owed more than $31 million in fees.

The firm, whose position afforded intimate knowledge of the property’s operation, said Shvo received an additional $45 million from BVK when he was terminated as asset manager in December, bringing his total exit compensation to $79 million. Shvo’s team has emphatically denied this, saying he remained the asset manager until the building’s March sale.

The lawsuit between BVK and Deutsche Finance America has moved into arbitration. Shvo’s apparently lucrative exit amidst significant investor losses has rankled some in Germany. Despite his name coming off the building, it seems there are more questions about Shvo and the Transamerica Pyramid deal.

The Bay Area office reset continues

When Southern California-based Kairo Investment Management Co. took control of the 10-story commercial building at 550 Kearny St., in 2024, it reflected an office market on the mat. The firm acquired a loan backed by the property for around $35 million, or $180 per square foot; a steep fall from the building’s previous sale value of $113 million in 2017, just under $600 per square foot.

Two years later, with an office market buttressed by a burgeoning artificial intelligence boom, Kairos is looking to flip the nearly 200,000 square-foot building for a price that could reach the high $60 million-range, according to the San Francisco Business Times on Friday.

The property is less than 30 percent occupied, but Kairos is advertising the building as ready for a repositioning. It reportedly struck a deal with architecture firm Gensler to bring the property up to the kind of quality tenants are searching for. According to the Business Times, 550 Kearny St. is the first “reset” building to come back up for sale.

Across the San Francisco Bay, a huge chunk of Oakland’s newest Class A office tower has come up for lease. The 607,000 square foot, 24-story tower at 601 City Center was completed in 2019, and remains the only top tier office tower completed in Oakland in more than a decade. The property, anchored by insurance company Blue Shield, has 260,000 square feet ready to be leased.

In San Francisco, the AI boom’s return-to-office phenomenon has been characterized by companies quickly leasing up the city’s top tier spaces while B and C class buildings continue to struggle. This property in Oakland will be interesting to watch, and could provide some clarity on how this boom will impact the different Bay Area economies. Is top-quality office space more important than location? Or will companies begin filling up lower-tier offices in San Francisco before heading across the bay?