Inside Nightingale Properties, The CRE Firm At The Center Of The Missing Millions

In literature, the nightingale’s song is a symbol of beauty so transfixing it lulls listeners in the darkness to ignore the dangers of the day.

Such a metaphor may be apt when considering the tale of Nightingale Properties, the New York-based investment firm that has accumulated a commercial real estate portfolio spanning millions of square feet across 22 states. Last year, it raised more than $60M for real estate deals in Miami and Atlanta, promising crowdfunding investors the opportunity to acquire trophy-quality real estate at a steep discount.

The vast majority of that funding is now missing, according to an independent fiduciary. What Nightingale has done with the money, as well as what the future holds for the firm, is now the subject of intense scrutiny.

Nightingale, led by CEO Elie Schwartz, was already entangled in lawsuits and financial distress. One of its largest properties is in receivership, two others are scheduled for foreclosure auctions next month and a Lower Manhattan skyscraper it sank a half-billion dollars into sits empty.

But the storm around it has built in recent days, with both the company and Schwartz himself accused of misappropriating funds in the botched crowdfunding deal. The entities Nightingale formed to raise $63M on CrowdStreet were put into bankruptcy by an independent manager appointed to investigate the evaporated cash.

"This is a simple, illegal behavior by a real estate developer,” CrowdStreet CEO Tore Steen said in an interview with Bisnow Tuesday. "I really don't believe it has anything to do with just the fact that it's crowdfunding. It has to do with the type of individual that chose to blatantly disregard the law and ethical behavior and, in this case, fiduciary responsibility."

Schwartz didn't respond to a request for comment. In the bankruptcy filings, the entities' restructuring officer said Schwartz's attorney indicated he would cooperate with the investigation.

The public collapse of the CrowdStreet deals has seemingly led members of Nightingale’s top brass to fly the nest. Will Hutton, its director of acquisitions, announced on LinkedIn on Tuesday he is “embarking on a new journey” and that he was thankful for “understanding and continued support through this transition phase.”

On Tuesday, an email to Avi Kollenscher, who was hired from Related last summer as an executive vice president at Nightingale, returned an automated response saying he is no longer with the company. His LinkedIn profile has no mention of his time at Nightingale.

Kollenscher and Hutton didn’t respond to requests for comment.

'Destiny Finally Had Its Day'

Nightingale was founded in 2005 after its co-founders, Schwartz and Simon Singer, met because Singer’s real estate firm, where he was working as an in-house counsel, hired Schwartz’s IT services firm, the company's website says. 

Within two weeks of that meeting, Nightingale — so named because it combines a rough English translation for the Yiddish word schwartz, meaning black, with the Old English word for singer — was off and running.

As of last year, company press releases described it as having a track record of investments exceeding $10B and having “owned and managed” 22M SF of retail, data center, life sciences and parking assets across 22 states.

At first, the company was a side hustle, and the pair had to convince investors to come on board without a track record. A website testimonial from one investor says they had “total faith” Singer and Schwartz would look after their money “as if it were their own.”

"Destiny finally had its day when Simon’s company hired Elie’s company to set-up a network in their Manhattan office," the website says. "The decision to partner wasn’t primarily about putting deals together or how well their skillsets meshed. For both founders, it was knowing that the other guy was someone they could count on."

Singer left the firm in 2021, his attorney said in an emailed statement. He had served as Nightingale’s president and primarily focused on managing the portfolio’s assets. He has since founded FTK Capital, a separate real estate investment firm.

"Nightingale was never involved with crowdsourced funding throughout Singer’s time there and Singer has not been a part of any Nightingale acquisitions since 2019," Singer’s attorney, Simcha Schonfeld, said in the statement.

"Singer has played no role in Nightingale Properties with respect to the management, financing, decision-making process, or the raising of capital since his 2021 departure. Singer never utilized crowdsourcing as a means of financing any of the deals that he was involved in. While Singer still holds stakes in a few of Nightingale’s legacy properties, he has been otherwise unaffiliated with Nightingale since his departure."

Schwartz is a Brooklyn native who has been the public face of the company since Singer left in 2021. He doesn’t list any educational institutions he attended on his LinkedIn profile.

In an online biography posted to Revere CRE, a digital networking group, he is described as “the classic entrepreneur — the kind of kid who made a mint selling and trading baseball cards and candy growing up. Who made a mini-business out of ordering 10 pizzas and selling it by the slice.”

A Revere spokesperson declined to comment.

“So long as we can make sense of an opportunity, we will pursue it,” Schwartz told the Philadelphia Business Journal in 2016 about the firm’s investment in the city.

A Legendary Flip, Lots Of Flops

For some, Nightingale may be best known for its involvement in the spectacular flip of 711 Fifth Ave., known as the Coca-Cola Building.

The soft drink giant had owned the property since 1983 and sold it in August 2019 to Nightingale and Wafra Capital Partners, now InterVest Capital Partners, for $909M. The buyers unsuccessfully tried to get out of the sale, claiming Coca-Cola didn't reveal a letter from 2017 between the company and a ground-floor retail tenant that Nightingale reportedly wanted to try and buy out of its lease. 

The sale went through, and within months the property was traded again at a $30M markup. Wafra sold its stake in the building to Michael Shvo — who Coca-Cola had rejected as a bidder — valuing the property at $937M, The Real Deal reported at the time.

Nightingale was subject to an anti-flip clause and stayed on as property manager, TRD reported, though it isn't listed on Shvo or Nightingale’s website.

Many of its other deals struck in recent years to acquire and renovate older office buildings have turned sour as the market turned.

In September 2021, Nightingale and partner Friedland Properties lost control of the 165K SF Midtown office building at 645 Madison Ave., PincusCo reported. They had acquired the ground lease for the building in 2015 for $76M but turned it over to lender East West Bank in an assignment of lease in lieu of foreclosure. 

In a tough economic climate where industry titans are handing back buildings with increasing frequency, a landlord having some financial problems at a midsized office building in New York is hardly attention-grabbing.

But those problems have piled up. 

The 2.2M SF, two-tower complex at 1500 Market St. in Philadelphia — the city's largest office property, which Nightingale bought for $328M in 2017 — was put into receivership in April, Bisnow reported this week. Lender Wells Fargo foreclosed on the building, which Nightingale owns with partner InterVest Capital Partners, in January.

In another partnership with InterVest, Nightingale owns one of the biggest blocks of empty office space in Manhattan.

The joint venture paid $175M in 2019 for the leasehold interest in the 25-story Financial District tower 111 Wall St., a 1.2M SF building Citigroup had just vacated. It then bought the fee interest on the property in 2021, paying $220M to Omnispective Management.

It spent $100M on renovations and secured a $500M loan package from SKW Funding, PIMCO, Oaktree Capital, Bain Capital and Austin, Texas-based Petros PACE, which provided $89M in Commercial Property Assessed Clean Energy financing, the first loan of its kind in the city.

The building is still empty. The New York Post's real estate columnist wrote last month that it "epitomizes the crisis" facing Manhattan office buildings. InterVest didn’t respond to a request for comment for this story. 

Nightingale acquired 300 Lafayette St. in Manhattan’s SoHo neighborhood in 2019 for $125M and leased the entire office portion of the building to Microsoft until 2036. Nevertheless, it is facing a potential foreclosure auction next month after lender TPG Real Estate Finance said it is owed about $129M in unpaid debts, Crain’s New York Business reported. As of April, the retail space at the building was empty, according to special servicer commentary in Morningstar Credit’s database.

In October 2020, Nightingale bought The Whale, a seven-story Sunset Park industrial property, for $84M from Madison Realty Capital and JPMorgan Chase, planning to convert it to creative offices. 

It took on an $88M loan for the project, but as of October 2022, only 27% of the building was occupied and Nightingale fell behind on payments, The Real Deal reported. After the lender, TPG Real Estate Finance, sold the debt to Capstone Equities, Capstone filed to foreclose on the building.

Nightingale sued both TPG and Capstone this year, claiming it had an agreement to buy the debt. A judge has largely dismissed those claims, TRD reported, and Capstone sued Schwartz personally last week, claiming he breached multiple guarantees on an $88M loan. Capstone called Nightingale's lawsuits against the lenders a “desperate gambit” and an attempt to “obfuscate and escape” liability. Capstone founder Joshua Zamir declined to comment, and his attorney didn't respond to a request for comment.

An auction for the 420K SF Sunset Park building is scheduled for Aug. 6, per TRD. 

Nightingale was trying to take advantage of the same market dislocation it has fallen victim to when it came to the CrowdStreet platform last year.

Its first deal, spending $130M on a 480K SF downtown Chicago office building, closed in February 2022. It was backed by $25M in crowdfunded equity, $13M in equity from Nightingale and an $89M senior mortgage from Citibank, the Chicago Business Journal reported.

Then it tried to go even bigger, raising $54M over the summer to acquire the 915K SF, three-tower Atlanta Financial Center in the city's Buckhead neighborhood for $182M — what it described as a "steep discount." 

The first sign of trouble was an August Wall Street Journal article that revealed Nightingale hadn't disclosed the loss of its 645 Madison Ave. investment a year prior. Some investors expressed concern that the loss hadn't been disclosed, but Nightingale responded that it had made losses on just two of its 36 investments.

“The omissions are benign,” a CrowdStreet spokesman told the WSJ last year.

But after failing to close on the Atlanta Financial Center deal — the largest fund-raise in CrowdStreet's history, the WSJ reported — some investors started asking for refunds. When Nightingale didn't process them with regularity in April, Steen told Bisnow that is when he started getting concerned.

When Nightingale wouldn't provide CrowdStreet with bank statements for the entities set up for the Atlanta deal and a smaller one in Miami Beach, the Austin-based crowdfunding platform moved to install an independent manager.

"When we weren't given those operating agreements, we were incredibly frustrated, angered and basically at that point took all action we possibly could," Steen said.

The independent manager told investors on Friday that a total of nearly $12M from the Atlanta and Miami Beach entities was directed into accounts controlled by and affiliated with Schwartz.

“The bottom line is that the money that was raised by both entities has been misappropriated,” the independent manager, Anna Phillips, said on an investor webinar. 

Steen and CrowdStreet President Scott Mackley wrote in a letter to investors posted on a CrowdStreet subreddit that Nightingale had references from “notable institutions including KKR, Citibank, Wafra Capital Partners, ICER Properties and DRA Advisors."

KKR declined to comment. The other firms didn't respond to Bisnow’s requests for comment.

“If you look at his list of references and Nightingale's list of references, all indications were that they were a reputable company that had performed in their transactions,” Steen said Tuesday.

“Whether it's done online or offline, fraud, unfortunately, exists in this industry,” he added. “Bad actors exist.”

Jarred Schenke and Ethan Rothstein contributed reporting to this article.

CORRECTION, JULY 20, 11:30 A.M. ET: An independent manager appointed to investigate missing funds put the entities Nightingale formed into bankruptcy. A previous version of this story misidentified who initiated the bankruptcy. This story has been updated.