The Daily Dirt: Elie Schwartz barely avoids default on $53M CrowdStreet debt

Nightingale Properties’ Elie Schwartz waited until the 11th hour to make his first payment to investors as part of a settlement over money he misappropriated.

The $3 million payment, due at the end of December, was technically already late. But Schwartz had a 10-day grace period to send the money before he was considered in default and was only handed a 1 percent late fee.

The CEO now has $50 million to go to make up his debt to the investors. As a quick refresher, Schwartz raised the money via CrowdStreet. An independent trustee said in July he had misappropriated the funds for other investments, including a historically bad bet on First Republic Bank.

Schwartz’s investors may have let out a sigh of relief when he made the payment, but it’ll make little difference to them in the short term. The trustee is holding the funds until the entire debt is paid.

Best case scenario, the debt will be paid off over several years in quarterly installments of $3 million. The next payment is due March 31.

Keeping up with those payments could require some hustle on Schwartz’s part, including offloading hundreds of millions of dollars worth of Nightingale and personal assets. But selling assets has become a source of trouble, too.

In September, Nightingale was closing in on a deal to sell a mixed-used Miami Beach building for $82 million to Robert Rivani and Mathieu Massa. But the deal never closed and may have fallen through, according to Bisnow.

If it has, future payments could be at risk, as Nightingale is running low on assets to finance the payments. The firm has defaulted on loans tied to several other key properties and is facing foreclosure at its most valuable New York buildings, 111 Wall Street and Brooklyn’s Whale Building.

If Schwartz can offload properties, he’ll have to deal with multiple spurned lenders and investors coming for the proceeds. His personal assets, which include a West Side condo, a New Jersey mansion and other holdings could fall well short of the sums owed to various creditors.

Can Schwartz pull off a miracle and turn it around? The clock is ticking, and we may find out as soon as early April.

The late payment wasn’t the only news that thrust Schwartz back into the spotlight. Two of his former executives joined former Nightingale partners, including one that is suing Nightingale after foreclosing on the Whale Building.

 —

What we’re thinking about: What do you think the future holds for Schwartz and Nightingale? Send a note to david.westenhaver@therealdeal.com.

—

Closing Time

Residential: The priciest residential closing Friday was $10.6 million for a condo at 42 Crosby Street in Soho.

Commercial: The most expensive commercial closing of the day was $9.5 million for a 13-unit building at 94-11 37th Avenue, Queens.

New to the Market 

The priciest residence to hit the market Friday was a house at 28 West 10th Street in Greenwich Village asking $15 million. Compass has the listing.

Breaking Ground

The largest new building filing of the day was for a 3,400-square-foot, three-family residence at 72-38 43rd Avenue, Queens. Askon Architects filed the permit application.

—

A thing we’ve learned: Long Island (which technically includes Brooklyn and Queens) may not look too big on the map, but, with an area of 1,401 square miles, it’s the biggest island in the contiguous United States. Hawaiʻi (a.k.a. Big Island) comes in first at 4,029 square miles, with Alaska’s Kodiak Island and the main island of Puerto Rico rounding out the country’s top three. 

Elsewhere in New York

— Former NYC comptroller and 2021 mayoral candidate Scott Stringer is exploring a primary challenge to Mayor Adams. The challenge would likely be an uphill battle, as an incumbent NYC mayor hasn’t lost a primary since Ed Koch in 1989. Adams could be vulnerable, thanks to budget concerns, a migrant crisis, and an FBI investigation, but probably not to Stringer, who has his own problems.

— “Buy now, pay later” businesses have boomed in recent years. But they’ve largely escaped regulation. Now, Gov. Kathy Hochul’s $233 billion budget includes a proposal to regulate such businesses, Gothamist reported. Hochul wants lenders to obtain a license to operate in the state.

— Raising houses is a common strategy to protect coastal residences from flooding, but presents complications for people who require a lift to get in and out of the house. The City reports New Yorkers, notably residents in parts of Queens where flooding is common, are often stranded in their homes when the lifts malfunction.