An explosive lawsuit filed on Wednesday alleges that Michael Shvo, the new owner of San Francisco’s Transamerica Pyramid, misled the public about an over-the-top new private club that’s key to his $1 billion-plus plan to purchase and revive the iconic property.
The lawsuit filed in New York State Supreme Court not only alleges that Shvo and his partners lied about his dealings with CORE: Holdings, the company behind the ultra-luxe members-only club, but that the developer enriched himself via fraud and ran up an unpaid $80K bill from personal use of CORE’s facilities.
The lawsuit is seeking the recovery of more than $600 million in damages, the cancellation of existing agreements between Shvo and CORE: Holdings and the termination of its lease in San Francisco.
The opening date for the club’s location in San Francisco, along with the first phase of the building’s renovation, has been pushed several times. CORE’s initiation fees cost between $15,000 and $100,000 in initial fees plus annual dues of $15,000 to $18,000.
“There is no realistic prospect of a CORE: club opening in San Francisco in September 2024 or at any time in the foreseeable future,” the lawsuit states. The company blames Shvo’s “deficient underwriting” for the continued reduction in CORE’s scope in San Francisco.
If the accusations are true, one key part of Shvo’s strategy to revitalize a crown jewel of the city may never get off the ground. The owners insist that the public lobby and a host of new amenities are still slated to open in the fall.
“The lawsuit filed today is a desperate attempt to bail out the owners of Core Club from fulfilling the very clear obligations they committed to in a series of binding written agreements,” Morris Missry, an attorney with Wachtel Missry LLP, who is representing Shvo and the defendants, said in a statement.
“We will not be threatened or pressured into providing rent reductions or other undeserved concessions and will aggressively defend this lawsuit.”
CORE did not respond to a request for comment on the matter.
According to the lawsuit, Shvo approached CORE in the spring of 2020 with an offer to invest $100 million to open up three locations in New York, San Francisco and Milan.
In exchange for a 50% ownership stake in the company, Shvo allegedly offered to finance and build the luxury clubs, underwrite the projects and set the rent. CORE executives were told it would have no financial responsibilities for the build-outs.
However, when it came to putting those agreements on paper, the deal was under much less generous terms. Eventually that forced CORE to secure alternative financing and go into debt when Shvo reneged on his initial offers to fund the development of the clubs.
Shvo and his German financing partners purchased the Transamerica Pyramid in 2020 for $650 million as part of a $3 billion buying spree that included a number of top-tier properties in markets like New York, Los Angeles and Miami Beach.
Recent reports have indicated that Shvo’s strategy to seek sky-high asking rents and prices for properties has begun to falter.
In New York, CORE accuses Shvo of mismanagement and overseeing substandard construction work that left the company “without a usable space for their members and forcing them to scramble to extend their former lease so they could stay in their old location at the significant cost of $800,000.”
Shvo urged CORE to move in employees anyway despite the property not being approved for occupancy and “to ‘hire illegals to wash the plates’ when the hot water was not connected,” the suit alleges.
The lawsuit also claims that while Shvo isn’t a member of CORE, he has personally racked up an $80,000 unpaid tab using the company’s restaurant and events space for events for his child’s school, a child’s birthday party and a weekly religious group meeting.
“Not only has Shvo not settled his bill, but he has also refused to pay any gratuities to CORE:’s hardworking staff,” the lawsuit states.