When the Transamerica Pyramid sold in March to a Cyprus-based investment firm for $691.6 million, it looked like the closing chapter of one of San Francisco’s messiest real estate dramas. 

Michael Shvo — the New York developer who had staked his reputation on reviving the iconic skyscraper — was out, and Germany’s largest pension fund, Bayerische Versorgungskammer (BVK), which backstopped the building’s renovation, was walking away after sustaining more than $1 billion in losses across its U.S. real estate investments. Case closed. 

But it’s not. 

Deutsche Finance America (DFA), the Munich-backed asset management firm that partnered with BVK and Shvo to buy and renovate the Pyramid in 2020, this week filed a petition in U.S. federal court asking a judge to freeze the proceeds from the March sale while the two former business partners fight over $31 million in unpaid management fees. 

DFA began working with BVK in 2018 as the German pension fund’s U.S. asset manager. 

The filing alleges that BVK has paid Shvo up to $79 million to walk away from the San Francisco property and is refusing to honor the same deal to DFA. As the two sides battle in arbitration, $691 million in proceeds from the sale are being held in a special purpose entity; neither side can touch the money until the matter is resolved. 

DFA accuses BVK of operating outside its permitted role as a passive investor during the group’s multiyear ownership of the pyramid. The company says BVK has engaged in a public smear campaign that has included misleading the Bavarian Parliament and pinning blame for the investment’s losses on DFA. 

DFA is requesting that the federal court formally recognize the freeze order so that it has legal recourse if BVK tries to move the money from the March sale prior to the completion of arbitration. 

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Representatives of BVK and Shvo did not respond to requests for comment. A spokesperson for DFA declined to comment.

By law, BVK was required to invest through separate, regulated fund structures that prohibited it from directly managing its own assets — leaving that role to external managers like DFA, the U.S. arm of Munich-based private equity firm Deutsche Finance Group. 

But according to the legal filing, DFA alleges that BVK inserted itself into day-to-day operational decisions and “systematically harmed” its investments by failing to approve operating budgets, maintenance and development measures, refinancing decisions, and proposed leases across its U.S. properties. 

“Ultimately, BVK’s obstruction, compounded by challenging economic conditions, led to substantial underperformance across its U.S. investment portfolio,” the petition from DFA says. 

By September 2024, the partnership was clearly unraveling. With losses mounting and BVK under growing scrutiny from German regulators and lawmakers, the two sides sat down to restructure their arrangement. 

Under that deal, DFA agreed to voluntarily step back from managing certain BVK assets and accept reduced fees across the board. In exchange, DFA secured what it believed was an ironclad protection for its remaining role at the Transamerica Pyramid: If it was terminated as asset manager before the end of 2028, it would be entitled to management fees it would have earned through that date — around $31.3 million. 

DFA claims that BVK struck an identical deal with Shvo under a parallel term sheet. In a deal reached last February, BVK agreed to pay the New York developer $45 million in exchange for terminating his agreements related to the Transamerica Pyramid. 

That promised payment is at the heart of the dispute. When BVK removed Shvo as asset manager Dec. 31, it paid him, but allegedly demanded that DFA exit and waive all management fees, which it refused to do. 

By the end of January, BVK had entered into a purchase agreement with Cyprus-based Yoda PLC for the Transamerica Pyramid without consulting DFA. The sale itself was not a problem, but DFA accused BVK of trying to reroute the proceeds in a manner that would have cut it out entirely.  

Furthermore, when the sale to Yoda PLC closed in late March, DFA said, BVK made an additional $34 million payment to Shvo, which it characterized as “above and beyond” the $45 million settlement, raising “grave questions” about disclosures and internal controls around the sale. 

The proceeds from the sale are sitting frozen while the two sides fight it out. How it ends remains to be seen.

But what’s clear is that of everyone who touched the Transamerica Pyramid over the last six years, one person, so far, has walked away with a handsome sum.