Nightingale Faces Foreclosure Suit At Midtown Office Building
Nightingale Properties is entangled in yet another legal imbroglio over an office building it owns.
Klosed Properties sued Nightingale and its CEO, Elie Schwartz, in Manhattan Supreme Court this month over the $30M worth of mortgages it has on 20 East 46th St., PincusCo reported. Long Island-based real estate investor Klosed purchased the loan on the building and wants a receiver to take over the office property ahead of a foreclosure auction, according to Crain’s New York Business.
Schwartz and his embattled company allegedly stopped meeting their debt obligations earlier this year, prompting original lender East West Bank to sell its debt to Klosed and Namdar Group. Nightingale had landed the $30M loan in 2016 when it paid $28M for the leasehold on the 120K SF property from Gary Barnett. The ground lease had 27 years left, and the balance of the loan at the time of default was $26.2M.
Nightingale has been mired in scandal for months, after it used CrowdStreet to raise more than $50M from investors last spring in a bid to buy the Atlanta Financial Center complex for $182M. It raised another $8.8M in the fall to renovate 1601 Washington Ave. in Miami Beach, an office building it already owned.
More than 600 investors participated, but neither deal closed, and Schwartz was accused of misappropriating the funds. An independent manager appointed to oversee the investment entities said that Schwartz spent $12M of the investor capital on stocks and stock options in First Republic Bank before it failed this spring.
Schwartz also spent investor funds, which were never placed in escrow, on luxury watches, art and third-party vendors. He agreed last month to repay investors in full in quarterly installments over the next three years, using funds from the sale of real estate he owns, including his Manhattan penthouse and a New Jersey mansion.
A lawyer for investors said he is skeptical the money will be returned, calling the agreement "hollow justice."
"I think there's a lot of other creditors that want a piece of Mr. Schwartz's assets," Joshua Kons, principal at Kons Law Firm, who said he is representing a dozen CrowdStreet investors, told Bisnow last month.
Many pieces of Nightingale's sprawling real estate portfolio have hit distress amid the scandal. It is facing possible foreclosure at its 111 Wall St. tower, lost the 420K SF historic Whale building in Brooklyn via a foreclosure action, is selling off its Miami Beach office building to pay off CrowdStreet investors and narrowly avoided foreclosure at 300 Lafayette St. in SoHo.
The largest office property in Philadelphia, which Nightingale acquired in 2017, has been placed in receivership.