How Germany's BVK Lost $1B on a Risky US Real Estate Bet
The managers of Germany’s largest public pension fund want to wipe their hands clean of their increasingly contentious exit from San Francisco’s Transamerica Pyramid.
Earlier this week, Bayerische Versorgungskammer (BVK) — a state-run institution managing the pensions of 2.8 million public employees in Bavaria — rejected accusations raised in a recent lawsuit that it broke investment rules and stiffed one of its partners out of more than $30 million after selling the Transamerica Pyramid in March.
As part of that lawsuit filed last month, Deutsche Finance America claimed BVK “went to concerted, conspicuous lengths” to skip paying the firm its early termination fee of $31.3 million. The firm claimed that BVK paid its other partner — New York developer and face of the Transamerica Pyramid revival, Michael Shvo — $79 million despite the partners having similar termination fee structures. Shvo’s payday, Deutsche Finance America said, raised “grave questions” about the deal.
Representatives of BVK called the allegations “unfounded,” and said they “vigorously reject” them, according to a statement released Tuesday to trade publication, Investment & Pensions Europe.
Partnering with Shvo and Deutsche Finance America, BVK funneled nearly $2 billion into seven U.S. properties, including the Transamerica Pyramid and the Raleigh Hotel in Miami, according to Deutsche Finance’s court filing last week. Although no precise final number has been released, BVK has estimated that losses on those investments could exceed $1 billion.
Deflecting accountability
BVK, which is supervised by Bavaria’s interior ministry, has continuously tried to evade direct responsibility for the series of failed U.S. real estate bets it made with pensioners’ money. It leans on the fact that it used what’s called a “fund-of-funds” structure to invest in the real estate portfolio, where BVK put money into third-party, Luxembourg-based funds that then made the investments.
In March, BVK’s CEO, Axel Uttenreuther, told a German news outlet that Deutsche Finance and Shvo had identified the properties in advance of BVK’s investment. Deutsche Finance has explicitly denied this claim.
Last summer, BVK fired its long-time head of real estate investment management Rainer Komenda after more than 20 years at the helm. Months later, Norman Fackelmann, who served just under Komenda, quit the institution, according to Investments & Pensions Europe. An internal investigation by BVK found Komenda had too close a relationship with its business partners, which included stays at luxury hotels and meals at high-end restaurants. Bloomberg reported that a younger relative of Komenda held internships at Deutsche Finance’s London and Denver outlets, as well as Shvo’s firm.
Komenda sued BVK over his dismissal. In March, a Bavarian court sided with Komenda. According to Investments & Pensions Europe, BVK planned to appeal and had fired Komenda all over again based on “fresh findings from a recent internal investigation.”
The pension fund sought to further distance itself from the Transamerica Pyramid deal with its comments on Tuesday. BVK told Investment & Pensions Europe that it learned of Deutsche Finance’s latest court filing through a “third party” and characterized the dispute as between Deutsche Finance and an externally managed fund of funds.
“BVK is neither a party to the petition nor to the arbitration proceedings,” a representative told the London-based trade publication.
Deutsche Finance America’s lawsuit does not explicitly name BVK as a defendant, but rather two Luxembourg-based investment funds, Elektra 2 and 711 Investments SCS. However, it says BVK acted through the two companies in refusing to pay DFA its fee for early termination of its asset management services on the Transamerica Pyramid.
Losing streak
In March, BVK sold its piece of the San Francisco skyline and the two adjacent properties for $692 million to Cyprus-based investment firm Yoda PLC. The sale marked a more than $200 million loss on the investment, part of the larger, billion-dollar losing streak for BVK’s U.S. portfolio.
At the time of the sale, Yoda PLC reported that, amid the losses for German investors, Shvo would receive a separate $34 million exit package that covered his broker’s pay for representing both sides in the transaction, an early termination fee and the cost of buying out his right of first offer agreement on the property.
Yet, as the estimates of losses grew for German investors, Shvo’s riches seemed to increase. Deutsche Finance America’s court filing last week claimed Shvo actually made $79 million on the deal thanks to an additional $45 million he earned in December after BVK allegedly terminated his contract as asset manager. That timeline contradicts Shvo’s claim that he remained asset manager until the property’s sale in March.
Spokespeople for Shvo have denied he was terminated as asset manager in December and said he stayed on in the role until the building’s sale in March. On several occasions, the spokespeople declined to comment on whether Shvo was paid an additional $45 million in fees.
Deutsche Finance is arguing that it had a fee-protection agreement identical to Shvo’s but received nothing after the property was sold.
The dispute between Deutsche Finance and BVK’s funds remains in arbitration. Meanwhile, lawyers in Bavaria whose pensions are managed by BVK have been gearing up for months for a possible class action-style lawsuit against the state-run pension fund and the state of Bavaria.
Editors Note: A previous version of this story misattributed a claim to Shvo’s spokespeople. The spokespeople declined to comment on whether BVK paid Shvo an additional $45 million in fees. They did not deny it, as previously reported.
This isn't a new story. Back in February, Julian West of AInvest wrote BVK's US real estate bet was a symptom of Germany's housing crisis, noting this:
The financial impact of Bayerische Versorgungskammer's US real estate missteps is contained, but the fallout is about trust. The group faces a potential additional loss risk of up to €690m from a small number of higher-risk development and refurbishment projects. This represents roughly 0.6 per cent of BVK's total €117bn portfolio, a level the group deems manageable. Crucially, BVK maintains that pension commitments to members are not affected, arguing that any losses are offset by gains in other asset classes. In 2024, the group delivered a capital-weighted net return of around 3.4%, meeting its central investment target.
Yet this is not merely a story of a small bet gone wrong. The core question is whether this is a manageable financial event or a symptom of deeper institutional failure. The scale of the potential loss is dwarfed by the group's total assets, but the governance and transparency failures are not. Members of BVK, which manages funds for 2.7 million people, are preparing legal action to obtain information and potentially compensation. German law firms have set up an interest group, claiming BVK has refused to provide information despite repeated requests, necessitating a lawsuit to force disclosure.
The thesis here is clear. The financial impact is contained within BVK's diversified strategy. The real damage is to fiduciary trust. The group's own measures-appointing an external manager, tightening partner standards, and strengthening compliance-admit to a breakdown in oversight. When a pension fund managing hundreds of billions cannot provide basic information to its members, even under confidentiality agreements, it raises fundamental questions about accountability. The bottom line is that while the numbers may not threaten pensions, the opacity and the need for legal compulsion to reveal them do threaten the very foundation of the system.
The Governance and Transparency Crisis
The core failure here is not financial, but fiduciary. While BVK's total portfolio is large enough to absorb the potential losses, its refusal to communicate with its members represents a fundamental breach of trust. The breakdown is now formalized through legal action. German law firms Mattil and Greger & Collegen have set up an interest group to seek disclosure, stating they have asked BVK "several times" for information but received no response. This has forced them to conclude that a lawsuit is necessary to compel transparency, with the case ready to be filed in Munich.
This legal push starkly contrasts with BVK's public messaging. The group's CEO has repeatedly emphasized that transparent, trust-based dialogue remains a core element of its governance approach. Yet the fund's actions in withholding information from members-its ultimate beneficiaries-undermine that very claim. The excuse offered, citing pending legal proceedings in the US and existing confidentiality obligations, does not hold up under scrutiny. The law firms represent members of the very pension funds BVK manages, and the information sought is about the fund's own investments and performance. The conflict is clear: a fiduciary refusing to communicate with its members.
The planned legal action in Munich seeks both disclosure and potential compensation for member losses. This is the ultimate consequence of a governance model that prioritizes legalistic defensiveness over open communication. When a pension fund managing hundreds of billions cannot provide basic information to its members, even through a legal representative, it reveals a system in crisis. The bottom line is that while the financial impact may be contained, the institutional failure-the refusal to engage-is what truly threatens the integrity of the pension system.
What a complete mess. I read this story and others related to it earlier today and I'm bringing it up on my blog for one simple reason: if you don't have the right governance, your pension fund is a swamp.
And proper communication figures into the right governance. In fact, it's governance 101.
Those lawyers in Bavaria whose pensions are managed by BVK need to go after BVK hard and make sure they get accountability and implement changes to the governance there to make sure this never happens again.
Let me be honest, this story reminds me of the Wild West days of real estate, where corruption and bribes were rampant.
Rainer Komenda is taking the fall for this mess, but the truth is BVK’s CEO, Axel Uttenreuther, should have also been dismissed from the organization.
In total, over $1 billion was lost on shady real estate deals. Blaming the fund of funds you hired is farcical; you still have the responsibility to oversee its investments.
I personally hate funds of funds because they add an extra layer of fees but I understand that sometimes you need expertise if you don't have it in-house.
BVK would have been better off approaching an Oxford Properties or QuadReal here in Canada than investing in some second-tier fund of funds.
It also sounds to me like Deutsche Finance America has a legitimate lawsuit and should get the same terms Michael Shvo received (Shvo and BVK’s CEO Axel Uttenreuther are feautured at the top of this post).
Anyway, what a mess. This is Germany’s largest public pension fund and this isn't a story you want associated with your organization.
No wonder members are furious and looking into class-action lawsuits (they will not recover losses but can demand changes to the governance structure).
Again, my advice is to get certified fraud examiners, audit the real estate department thoroughly and figure out who was accountable and what changes can be made in the governance structure to make sure this never happens again.
I would also take a closer look at Michael Shvo's role in all these real estate dealings.
Below, an older (December, 2024) clip where developer Michael Shvo discusses his $1B San Francisco investment in Transamerica Pyramid (see backstory here) and why he believes the redesigned iconic building is the Rolls Royce of office.
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