Cross-Border Property Losses Trigger Criminal Probe at German Pension Fund
Munich prosecutors raided Deutsche Finance on Tuesday as part of an investigation into US real estate investments that produced substantial losses for BVK, Germany’s largest public-sector pension fund. BVK oversees €122 billion in retirement assets for 2.8 million Bavarians and has flagged potential write-offs of as much as €853 million on US properties linked to Deutsche Finance and New York developer Michael Shvo’s firm SHVO. Deutsche Finance confirmed the search and said it is cooperating as a third party, while prosecutors declined to specify the focus of their probe. Süddeutsche Zeitung reported the investigation centers on allegations of bribery through trips and amenities.
BVK invested roughly €1.6 billion in a portfolio of US trophy assets including the Transamerica Pyramid in San Francisco, 685 Fifth Avenue and 711 Fifth Avenue in New York, 9200 Wilshire Boulevard in Los Angeles, and 333 South Wabash in Chicago. By the end of last year, the pension group had already written off €392 million of those investments. SHVO said earlier this year that the properties are outperforming the market with record rents and blue-chip tenants, while Deutsche Finance said in January that its US subsidiary had no discretionary authority over investment selection or execution.
Two senior BVK managers departed after an internal investigation found compliance violations, including lavish business trips. German prosecutors have not accused Shvo or his firm of wrongdoing, and neither Deutsche Finance nor the prosecutors mentioned SHVO in their Tuesday communications. Germany’s vocational pension fund industry, which manages roughly €300 billion in retirement savings, operates under fragmented supervision and is often overseen by people with limited investing experience.
Several German vocational pension funds have surfaced as backers of US real estate developments and other investments that faltered when interest rates rose. BVK’s losses have intensified scrutiny of governance practices across the €300 billion sector, which forms a critical piece of Germany’s retirement infrastructure. The Munich prosecutors’ office said it will release additional details on the investigation in the coming days.
The post Cross-Border Property Losses Trigger Criminal Probe at German Pension Fund appeared first on Propmodo.
