Next to a picture of his family on Michael Shvo’s desk is a framed sketch he made when he was a young boy. Inspired by a trip to San Francisco, the image is of a stick figure drawing of himself beside the sharp angles of the Transamerica Pyramid.
“This was my American Dream,” said Shvo, the CEO of his eponymously named real estate development firm, from a conference room on the pyramid’s fifth floor. “It’s somewhat unbelievable. I still walk by the building and get goosebumps because I can't believe we own this building.”
Shvo, a New Yorker, began his career in real estate as a luxury residential broker in Manhattan. Four decades after his visit to San Francisco, he controls a portfolio of real estate around the country worth billions of dollars—including the 1972 building that loomed so large in his childhood imagination.
He purchased the iconic 48-story property at 600 Montgomery St. for $650 million in 2020 and has plans for a $400 million renovation that includes the tower, adjacent structures at 505 and 545 Sansome St., as well as the adjacent redwood park. The project will expand and open up the park to create an active hub connecting the neighborhoods of North Beach, Jackson Square and Chinatown.
"You're going to have a park with three buildings inside the park," Shvo explained. Anywhere you come from around here, you'll see the green. You're going to feel like you have these buildings sitting within a park."
The completion date for the pyramid’s lobby renovation and upgrades to the redwood park has stretched out from the end of the year to the first quarter of 2024. Other renovations will take longer. Among the upgrades are a branch of the high-end Core club, which has a reported initiation fee of $50,000, as well as a private skybar only available to tenants.
Despite the negative headlines that have surrounded both San Francisco and the larger commercial real estate industry, Shvo remains bullish on the city’s future and the irreplaceability of office-based work.
“I’ve been always the most positive person about San Francisco while everyone wrote off the city,” Shvo said. “And interestingly enough, we’re sitting here today, and all of a sudden, the word on the street is it ain’t that bad; it’s getting back.”
He pointed to the example of a May Financial Times article that illustrated the city’s “doom loop” with overexaggerated illustrations of ruined buildings and an overgrown jungle out of The Last of Us. As a city symbol, the pyramid was featured prominently.
“I called up the FT and said, ‘Can you introduce me to the guy that does your renderings?’” Shvo said. “It’s a nonsense article, but they did a great job on the imagery to make headlines.”
Shvo believes that the tide is turning on remote work as major Fortune 500 firms start to mandate that employees return to the office.
“The work-from-home model is not something that's sustainable because we are here to collaborate,” Shvo said. “That’s why you go to work.”
Shvo said that he’s looked at purchasing other buildings in San Francisco, including the former PG&E headquarters at 77 Beale St., but owning the pyramid is a bit of “double-edged sword.”
“I own the Transamerica Pyramid. It's very hard after you own this building to buy almost anything else,” Shvo said. That being said, Shvo said he was outbid in some of his purchasing efforts in the city but believes he’ll be able to take advantage of current distress to buy buildings directly from lenders.
As for his own prospects for refinancing his Transamerica Pyramid buy, Shvo said he’s unconcerned.
“I have many years to go, but also, my rents have doubled. I went from rents that were $65 to $100 a foot to north of $250 a foot,” Shvo said. These rates mark the tower as one of the most expensive office buildings in the country, with rates far higher than other trophy properties.
Tenants in the property include Northwestern Mutual, Callan Associates and BakerHostetler, according to the Shvo company website, though it’s unclear how much of the tower is currently leased.
The current distress in San Francisco real estate circles, caused by a combination of remote work and sky-high refinancing costs, has led to fears of empty or “zombie buildings” across the city. However, Shvo said this is part of a normal process where new structures are erected to replace buildings that are “past their shelf life.”
“You can’t take milk that’s sour and make a milkshake out of it,” Shvo said. “Buildings that have expired are going to have be demolished and brand new buildings are going to have to come instead.”
That’s where the public sector can help step in, according to Shvo, by helping to kick-start development by shortening timelines for approvals or providing incentives to build.
San Francisco is a notoriously difficult place for developers, but Shvo said he’s had a great experience working with the city, in part because officials realize the symbolic importance of the investment being made in what he’s calling the “Transamerica district.”
Shvo launched a marketing campaign for the pyramid tied to its 50th anniversary in 2022. The theme: “Ahead of its time since 1972.”
Although Shvo said he typically doesn’t get involved in politics, the prominence of his investment has meant that he has had the ear of city leaders. He’s used the opportunity to argue for them to change what he called an “arrogance” in San Francisco’s relationship with the business community.
“The companies and CEOs of companies have to feel the love from the city,” Shvo said. “I can't tell you how many times I’ve voiced that at a loud voice. When the city understands that companies need to feel loved and courted, everybody that is thinking of leaving is not going to leave, and some of the people that left might come back.”
So, is the city doing a good job on that? Better than it was a year ago, he replied.
“I believe today that the role of a mayor is one where you are the promoter of the city,” Shvo said. “You need to wake up in the morning and say, ‘How do I promote my city? How do I make the people that live here love San Francisco and have them feel like San Francisco loves them?’”