Core Club sues Michael Shvo for $600 million in fraud

June 27, 2024

Core Club sues Michael Shvo for 0 million in fraud

The owners of an exclusive members-only club have sued developer Michael Shvo, alleging that he overpromised and underdelivered in the development of high-profile club locations in New York City, San Francisco and Milan.

The Core Club, founded in 2005 by Jennie Enterprise, accused Shvo of fraud and demanded that he and his partners reduce the rent of the Manhattan club, terminate the lease on Shvo’s Transamerica Pyramid and pay $600 million in damages.

According to the lawsuit, Enterprise began a business partnership with Shvo in 2020, and their club signed a 20-year lease in 2021 for 60,000 square feet at Shvo’s 711 Fifth Avenue, once known as the Coca-Cola Building.

Shvo is said to have promised to invest $100 million in expanding the New York location and developing branches in Shvo’s Transamerica Pyramid and in Milan in exchange for a 50 percent stake in the Core Club.

Enterprise and its various core groups claimed they were deceived by Shvo, not only about his promises of investment and turnkey clubs, but also about the ownership of the New York and San Francisco buildings. According to the lawsuit, Shvo claimed he had equity interests in 711 Fifth Avenue and the Transamerica building, but was in reality “just the property manager.”

Shvo had acquired the buildings together with investment partners Bayerische Versorgungskammer, Germany’s largest pension fund, and Deutsche Finance Group, both of which are named as defendants in the lawsuit.

The lawsuit alleges that Shvo lured the Core Club with unfair loan terms and lease agreements to increase the value of its properties and attract other high-profile tenants.

Shvo’s lawyer disputed the version of events described in the lawsuit and called it a pressure tactic.

“The lawsuit filed today is a desperate attempt to prevent the owners of the Core Club from fulfilling the very clear obligations they agreed to in a series of binding, written agreements,” Wachtel Missry attorney Morris Missry said in a statement. “We will not be threatened or pressured into granting rent reductions or other undeserved concessions and will vigorously defend ourselves against this lawsuit.”

The motion was filed just weeks after Shvo sued the club for allegedly failing to repay a $1 million loan to expand the club’s three locations.

When Core Club signed the contract with Shvo, the lawsuit alleges, he “painted a picture of turnkey clubs and comprehensive financing,” but the opening of the 711 Fifth Avenue club was plagued by delays, mismanagement and poor craftsmanship.

The lawsuit also alleges that Shvo used the club “as a de facto private office to host meetings and events for business associates and friends.” Shvo allegedly ran up an $80,000 bill at the Core Club’s restaurant and event space for events at the Ramaz School, which his child attends, as well as for a child’s birthday party and weekly meetings of religious groups.

“Not only did Shvo fail to pay his bill,” the lawsuit states, “but he also refused to pay any tips to Core’s hard-working employees.”

The Core Club was announced to be moving into the Transamerica Pyramid in 2021, and the opening was only announced this month in the San Francisco Chronicle, but the lawsuit says there is “no realistic prospect” that the 45,000-square-foot space will open this year or in the foreseeable future.

Also unclear is the future of the Milan location, which Enterprise’s lawyers described as a cornerstone of the deal with Shvo.

Enterprise’s attorney could not be reached for comment.

The case comes at a bad time for Shvo. On Wednesday, his former partner, Turkish businessman Serdar Bilgili, continued their feud with a new lawsuit over ownership of a Manhattan condominium project. Earlier this month, the Wall Street Journal published an investigation into Shvo’s precarious real estate portfolio, as did Business Insider.