New details have been revealed about the surprising settlement between Elie Schwartz, his firm Nightingale Properties and CrowdStreet investors.
The investors who put tens of millions of dollars into two Nightingale projects are now counting on Schwartz to sell some of his key assets in order to repay them. New filings in bankruptcy court show which assets Schwartz will look to unload.
A number of Nightingale’s properties have faced foreclosure or have been transferred to Nightingale’s partners, leading to concerns about how Schwartz would pay back its investors.
Bisnow first reported on the settlement.
Nightingale raised $54 million from 654 investors through CrowdStreet, a crowdfunding platform, to acquire the Atlanta Financial Center office project. Schwartz also raised about $8.8 million from 167 investors to recapitalize a Miami Beach office property. Both deals never closed and investors clambered to get their money back.
This summer, an independent manager for the investors, Anna Phillips, alleged Schwartz misappropriated most of the money. He bet about $12 million on First Republic stock and options, which tanked when the bank was seized by regulators.
Earlier this month, Phillips informed investors in a webinar about the settlement and mentioned that Schwartz would put liens on his properties to repay investors.
But the new filings, which were brought up during a webinar Friday, reveal new information about the proposed settlement with CrowdStreet.
The crowdfunding platform provided the investor entities $400,000 to restructure and settle through bankruptcy protection. CrowdStreet agreed to lend an additional $1.85 million to the debtors. CrowdStreet said it would subordinate these loans if investors release any alleged claims against CrowdStreet. If investors opt in, CrowdStreet could make additional funds available, according to the filing.
The proposal is noteworthy considering that CrowdStreet has come under scrutiny itself for failing to put investors’ funds into escrow and allowing the money to flow to Schwartz.
CrowdStreet has countered that Schwartz is to blame. It has claimed the platform was just a marketplace and not required to put the funds into escrow. CrowdStreet did not return a request for comment for this story.
The settlement between investors, Nightingale and CrowdStreet gives more insight into how Schwartz plans to repay investors. At the center is the sale of the Miami Beach property where Schwartz allegedly diverted money.
The former Starwood Capital headquarters at 1601 Washington Avenue is under contract to sell to Robert Rivani’s Black Lion Investment Group and Massa Investment Group for $82 million. If the deal closes, Schwartz has agreed to pay investors $3 million by December, followed by quarterly payments.
Schwartz’s personal residences are a major component of the settlement. Schwartz’s penthouse at One West End in Manhattan will hit the market six months from the plan’s approval in bankruptcy court. Schwartz would be allowed to keep about 10 percent of sale proceeds to pay for somewhere else for his family to live.
An entity connected to Schwartz bought the four-bedroom penthouse for $18 million in 2018. Reached for comment by The Real Deal at the time, Schwartz denied any knowledge of the deal.
Next on the list is Schwartz’s 11-bedroom Englewood, New Jersey French chateau, which is on the market now for $3.9 million. Schwartz’s jewelry, watches and art are also for sale. Schwartz will put a lien on Five Park 3003 LLC, a Florida company which collects acquisition fees and is registered to him.
Schwartz’s settlement appears to show in which assets he still has equity. It mentions Nightingale’s Philadelphia properties at 1835 Market Street, 1635 Market Street and 1500 Spring Garden Street.
Its 1 million-square-foot office building at 1500 Spring Garden is reportedly facing foreclosure, according to Bisnow. In New York, an entity connected to a 10-story Harlem office building is mentioned.
Notably missing are Nightingale’s stakes in its once marquee assets 111 Wall Street in Manhattan, where foreclosure was looming, and the Whale Building, which it lost to foreclosure in August.
Schwartz has to respond to the allegations in the press.
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