Michael Shvo is at the center of $3 billion worth of property deals, making him a main player in premium real estate – but just three years ago he pled guilty to a crime that made international headlines.
Dressed in a black Armani T-shirt—he has 100 of them—Michael Shvo sits in front of a Zoom background depicting the jewels of his real estate portfolio: The Transamerica complex in San Francisco (acquired with partners for $650 million last fall), Miami’s Raleigh Hotel ($103 million), Big Red tower in Chicago ($376 million), the old Coca Cola building on Fifth Avenue ($956 million) and more. “Somebody told me the other day, ‘You have a good strategy, you’re buying all the buildings in the Lego set,’” Shvo says.
In the past three years, Shvo, 48, and his main partners—Deutsche Finance Group (not affiliated with Deutsche Bank) and BVK, a German pension fund that puts up the majority of the capital—have bought over $3 billion worth of real estate across the U.S., funded with less than 50% in debt, making them some of the country’s most prolific buyers. According to Shvo, they plan to buy billions more in major cities in the two years ahead.
The partnership, when it emerged in 2018, seemed an odd pairing. German investors are notoriously conservative, and Shvo had just pleaded guilty to tax fraud over the purchase and shipment of art, jewelry and other luxury goods. “Through ornate ruses—like creating a sham Montana corporation to avoid taxes on a Ferrari—the defendant dodged more than a million dollars in state and local taxes,” Manhattan District Attorney Cyrus Vance said in a statement announcing the plea. Shvo agreed to pay $3.5 million in unpaid taxes, penalties and interest.
The person behind Shvo’s comeback: a Turkish hotel magnate named Serdar Bilgili, who used to refer to Shvo as his brother and introduced him to his wife. Bilgili knew the Germans from prior investments and convinced them to back Shvo after a round of due diligence. “I don’t think any of these institutions, if we were not involved, would just go and meet Michael and do these deals,” says Bilgili, who has since fallen out with both the Germans and Shvo.
Armed with that endorsement, and an endless source of capital from BVK, the partners commenced an audacious plan: acquire the very best properties in the very best locations at whatever price necessary, under the assumption that ultra-prime real estate will always increase in value. “We’re not here to buy a building today, make a few bucks and sell it a year, two years down the road.” Shvo says. “[It’s a] long-term investing strategy, you know, ten years plus…. And really, with absolutely no compromises.”
Former Friends: Michael Shvo and Serdar Bilgili were so tight knit that Bilgili introduced Shvo to his wife. Now their partnership is over.
Alexander Tamargo/Getty Images
Shvo suggests his personal stake in these projects is worth more than $100 million. “The top [of the range] is we own maybe 15% of the deal,” he says, of the partnership’s ownership percentage, which is split equally. “Typical would be 10%, and in some cases call it 5%.” It’s not clear how he would have come up with his share of that money. Prior to the current buying spree, Shvo largely worked as a broker and real estate marketer, where it’s difficult to imagine a nine-figure return.
According to Bilgili, Shvo didn’t come up with those funds. No one did. “In all these businesses, especially on the development side, we put about only 2-3% of the total equity,” he says. In some cases, he adds, the partners invested nothing, opting instead to generate fees for managing the properties and to take a cut of whatever upside they generated when the buildings eventually changed hands. (Another source with direct knowledge of the situation confirms that the partners invested substantially less than Shvo implies.)
“The current market environment is not deterring us from buying real estate. If anything, it’s causing us to buy more.”
If that’s true, then Shvo is not only inflating his own net worth, he is severely downplaying the risk to the German pensioners who underpin his deals. Due to Covid, demand for office space in New York City plummeted 68% over the last year, according to VTS, a real estate software firm; in San Francisco it dropped 52%. Firms like Elliott Management are shifting from Manhattan to Florida, and the suburbs are flourishing. Nobody knows what urban demand will look like when the dust settles.
“You’re goddamn right there’s risk. Huge risk. Huge,” says Eric Anton, a broker at Marcus & Millichap in New York City.
Shvo remains at ease. “The current market environment is not deterring us from buying real estate,” he says. “If anything, it’s causing us to buy more.”
Shvo’s backstory, as he tells it, seems improbable itself. Born in Israel, his parents taught organic chemistry at Tel Aviv University, affording the family a solid middle-class lifestyle. When he was young they took sabbaticals at Stanford and Yale. Later, while serving in the Medical Corps of the Israeli army, Shvo claims he made “a lot of money” trading oil and gas stocks. “I could have retired when I was twenty-two,” he told Steven Gaines in the 2005 book The Sky’s the Limit: Passion and Property in Manhattan.
According to Shvo, he lost all the money in a market downturn in 1995. “I had $3,000 in my pocket,” he recounts. “I said, ‘Okay, what do I do now?’ I got on a plane and came to New York.”
There, on 101st Street, he says he slept on a friend’s floor and went days without eating. (He says he doesn’t remember the name of the friend.) As he tells it, Shvo somehow scraped together the funds to buy a yellow cab, leased a medallion and then subleased the car by the shift. “Three months later, I had 10 yellow cabs and 30 drivers,” Shvo says. “The cabs were nothing… like $2,000 each at the time. And the guy that was selling me the cabs also was leasing me the medallions so he was letting me pay in installments.”
Manhattan Marketer: Shvo calls his consumer-centric approach to real estate “The Shvo Way.”
Gabby Jones for Forbes
“That’s the first real idea that I brought into the real estate business that changed the world.”
Bruce Schaller, an urban transportation consultant, says he finds the story hard to believe. “$2,000 per vehicle, even if you’re thinking, you know, very bottom-scraper terms, I just don’t think it’s credible,” he says. (Shvo stands by the story.)
Either way, Shvo says he left the taxi business in 1997, and after dabbling on other hustles, like a cigar bar, found himself looking for longer-term traction. By coincidence, a woman in his building knew Yuval Greenblatt, a manager at Sopher Real Estate (now part of Douglas Elliman), and referred the 27-year-old Shvo to become an agent. Greenblatt agreed to bring Shvo on. “He’s pretty good at learning pretty quickly,” Greenblatt says. “He’s one of the few people who has both sides of the brain working at the same time.”
At the outset, Shvo says, he “knew nothing about real estate.” To compensate, he hustled, working until well after midnight seven days a week. When customers called after hours looking for an agent, Shvo says he was the only one there, and he’d get the job. At times he’d show dozens of apartments in a day, often cheap listings that nobody else wanted. “My first year at Douglas Elliman, I rented 360 apartments,” he says.
Then, to further boost his output, Shvo brought in a team of his own junior agents to show listings; he would keep a cut of their work. “That’s the first real idea that I brought into the real estate business that changed the world,” he says.
“I doubt that he actually invented the model,” clarifies Greenblatt, now an executive manager of sales at Elliman. “But I could certainly say he took it to a new level.”
In 2004, Shvo decided to strike out on his own, with a new career as a real estate marketer. His first project came from a friend, Shaya Boymelgreen, who had purchased an old Chase bank at 20 Pine Street in the financial district, which he planned to convert to luxury condos. He tasked Shvo with convincing people to move in—a tough sell so soon after 9/11.
Shvo spent a week thinking, then came to Boymelgreen with a proposal. “I want Armani to design the building,” he said. The owner’s response, according to Shvo: “Who is Armani?”
Shvo’s idea won out, and the plan seemed a hit. The building’s launch party in 2006 exceeded capacity, leaving 300 people outside in a blizzard, Shvo says. John Legend performed, and multiple units immediately sold. “That was a global game changer,” he says, of the project. “It really jump-started my career as a marketer.” (In truth, amid controversy over construction issues, it took seven years for the building to completely sell out, according to The New York Times, by which point Shvo had left the project.)
More deals followed: an entire island in Abu Dhabi, properties in the Seychelles, Mauritius and the Bahamas. Across the globe, Shvo worked to turn ordinary real estate into a status symbol. “I only hired people from the luxury brand world…. From Gucci, from Brioni, from Neiman Marcus, a lot of fashion companies,” he says. “Because for me, real estate is a luxury brand. It’s not four walls, a kitchen and a bathroom.”
Crown Jewels: Shvo and partners’ properties across country include the Transamerica Pyramid in San Francisco (left), 685 Fifth Avenue in New York, The Raleigh Hotel in Miami, and The Big Red in Chicago.
Photos, from left: Getty Images; Marin Architects; Mose Studio; Lipman Studio
The Great Recession brought the global real estate market to a halt, Shvo’s deals included—though he says he saw the crisis coming and preemptively decided to retire. Soothsayer or not, by then he was on his way to the thermosphere of New York society. He now eats casual dinners in the skybox at Daniel, the two-Michelin star restaurant in Manhattan, asking chef Daniel Boulud, a friend, to serve up whatever. (“He loves salmon,” Boulud observes.) The reclusive billionaire Jeff Sutton calls him “very creative.” The celebrity designer Peter Marino, known, among many things, for dressing in full leather regalia, says Shvo is “a real expert salesman,” and that his “very fancy car”—a Rolls Royce—”always amuses me.” Even Shvo’s rabbi is a power player. “He doesn’t stop growing,” says Rabbi Avraham Moyal, whose congregation also includes Sutton and the billionaire Ben Ashkenazy.
Shvo’s latest chapter, which solidified that ascent, began with an old gas station in Chelsea, New York, which he bought with partners in 2013 for $34 million and rebuilt as luxury condos. The Getty Building, as it’s now called, stands 12 stories tall; each of its 48 bathrooms is finished with a different kind of stone. “Wealthy people want to have something that nobody else has,” Shvo says.
One silent partner on that deal was Serdar Bilgili, the Turkish hotel magnate. The pair then invested in a series of luxury projects together, before Bilgili connected Shvo to Deutsche Finance Group in 2018, just as his tax fraud case was heading toward a plea.
“We [did] a background check,” says Deutsche Finance executive partner Sven Neubauer. “And we didn’t really find anything that gave me a reason to doubt his integrity vis-à-vis his business partners.” Neubauer adds that Shvo has become “a valuable and trusted partner for Deutsche Finance.”
Buying Spree
A timeline of Shvo’s deals. He and his partners acquired $1.4 billion of real estate in 2020 alone.
So began the ultra-prime real estate investing strategy, with Shvo, Bilgili and Deutsche Finance as the general partners, and BVK serving as one of the limited partners, which collectively put in most of the money. Their first purchase was 685 Fifth Avenue in 2018 (for $135 million), followed by three Miami hotels ($240 million) and a development project in Beverly Hills ($130 million). From there, the money kept flowing.
Then it kept flowing without Bilgili. To his surprise, Deutsche Finance and Shvo closed the Transamerica and Big Red deals in 2020 without him, prompting litigation that remains ongoing. Shvo declined to comment on the record about why Bilgili was kicked out, but a lawyer for the partnership alleges that he is “trying to find a way to offset his own reported difficult financial situation in Turkey… or is just upset at not being relevant.” A lawyer for Bilgili says that, in fact, he was pushed out after raising questions over Shvo’s expense accounts. (Both parties dispute the other’s account.)
Forbes obtained an audit of Shvo’s spending practices conducted by one of Deutsche Finance’s accounting firms. It shows that he was reimbursed an average of $1,325 per night to stay at an apartment in Miami 83 times in 2019, as one example, and that his firm racked up over $700,000 in travel expenses. The report’s authors said they found no invalid expenses, however.
Amid the tumult, Shvo is pushing forward, placing faith in his keen eye to find the next big deal. “We see things differently. I see things differently,” he says. But in the end, the numbers will speak for themselves.