MUNICH: Asset manager Deutsche Finance has been raided, escalating scrutiny on US property investments that spurred losses for one Germany’s largest pension funds.
Munich prosecutors searched the offices of Deutsche Finance on Tuesday in connection with US real estate investments carried out by German pension fund group BVK, the asset manager confirmed to Bloomberg.
Deutsche Finance is cooperating and has been in contact with the authorities for quite some time, it said, adding it was searched as a “third party”.
BVK’s US property investments have become a matter of public scrutiny in Germany as the group has flagged big losses on a chunk of US properties that it links to Deutsche Finance and the real estate development firm SHVO, owned by New York developer Michael Shvo.
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• BVK, which manages 122 billion euros in retirement assets for 2.8 million Bavarian workers, faces potential write-offs of up to 853 million euros on a 1.6 billion euro portfolio of US properties, with 392 million euros already written off by the end of last year.
• The investigation, which also involves allegations of potential bribery and compliance violations, has prompted the departure of two senior BVK managers and raised broader concerns about governance and oversight within Germany’s 300 billion euro vocational pension industry.
• Deutsche Finance maintains its role was limited to structuring and regulatory coordination without discretionary investment authority, while developer Michael Shvo’s firm SHVO asserts the properties are outperforming the market with record rents from blue-chip tenants.
• The affected US real estate portfolio includes high-profile assets such as the Transamerica Pyramid in San Francisco, 685 Fifth Avenue in New York, and 333 South Wabash in Chicago, which have struggled amid rising interest rates.
