Boro Park investor sues Elie Schwartz over Midtown East foreclosure
Nightingale “may have diverted monies” for other purposes
Elie Schwartz is facing yet another lawsuit.
Crown Merchandise, a Boro Park-based investor, sued the embattled developer, alleging Schwartz and his firm Nightingale Properties refused to hand over the books and records for a Midtown East office building. The lender on the 20 East 46th Street building is now seeking to foreclose and appoint a temporary receiver.
Crown alleges Nightingale, Schwartz and his former partner Simon Singer never provided it with an account of its investment in the property.
The complaint also allges that Nightingale never explained why the building’s $30 million loan fell into default.
“It appears that the Nightingale Parties may have diverted monies for purposes contrary to the provisions of the LLC Agreement,” Crown alleged in its complaint in New York state court.
Crown, which corporate records tie to Raizy Kryman, invested over $12 million and alleges its remaining investment of $9 million is at risk because of Nightingale’s actions.
In October, Crown sent Nightingale a list of demands. It sought the property’s books and records and taxes.
But Nightingale never responded. Instead, Crown alleges, the lender, which appears to be a joint venture between Klosed and Namdar Group, initiated a foreclosure in November. The lender also said it had the right to go after any gap between the foreclosure sale and the amount owed on the loans.
Nightingale never contested the foreclosure. On November 20, Nightingale sent Crown a letter stating it planned to hand over the keys to the lender and had “no interest in engaging in a lengthy and costly litigation.”
Crown claims Nightingale agreed to turn over the building so Singer and Schwartz could be relieved of their personal guarantees on the loans.
On November 21, Crown sent Nightingale a letter claiming it was not forwarded any notice of default, or about a forbearance agreement, or the maturity default until Schwartz contacted one of Crown’s principals after the loan was sold. Crown told Nightingale it did not consent to giving the property back to the lender.
The dispute is just one of many for Schwartz. A trustee for investors in two of Nightingale’s office deals in Atlanta and Miami Beach alleged Schwartz misappropriated tens of millions of dollars. Schwartz allegedly used some of this money to bet on First Republic stock before the bank was seized by regulators. In October, Schwartz and the trustee reached an agreement to settle the dispute.
Nightingale also lost many of its key assets to foreclosure, including the Whale Building in Brooklyn’s Sunset Park and 111 Wall Street.
Schwartz and Singer did not immediately return a request for comment. The attorney representing Crown Merchandise, which lists its address as 1855 48th Street, Brooklyn, also did not return a request for comment.