Nightingale's $82M Miami Beach Office Sale Collapses In Flurry Of Lawsuits

The planned $82M sale of a Miami Beach office building owned by Nightingale Properties has failed to close, sparking a court battle between the embattled developer and the planned buyers.

The dispute rose to the surface just as CEO Elie Schwartz began repaying $53M in funds he misappropriated from two crowdfunding campaigns, including one at the Miami Beach building at 1601 Washington Ave. The sale was a key cog in his plan to repay investors.

Nightingale filed suit earlier this month in the 11th Judicial Circuit Court for Miami-Dade County, alleging that it is entitled to a $2M deposit because the Miami-based buyers, Black Lion Partners and Massa Investment Group, failed to close on the deal by the contractual deadline. 

Black Lion and Massa filed a counterclaim in response, alleging that Nightingale refused to agree to an extension provided for in the contract and accusing the firm and its CEO of a host of other violations to the terms of the deal. They’re looking to recover the deposit, along with attorney’s fees.

A hearing is scheduled for Wednesday to consider the claims. 

“Black Lion complied in full with the terms of the purchase agreement and terminated the agreement because of failures of conditions precedent to a closing, including material misrepresentations by Nightingale Group, and its principal, Elie Schwartz,” Philippe Lieberman, a shareholder at Kluger, Kaplan, Silverman, Katzen & Levine who is representing Black Lion and Massa, said in a statement. 

A representative for Schwartz and Akerman, the law firm representing him, didn’t respond to Bisnow’s requests for comments. A spokesperson for Black Lion and Massa directed Bisnow to its attorney and declined to comment further. 

Black Lion and Massa, through their affiliate, RKR Gaia 2 LLC, allege in their countersuit that the effort from Nightingale to claim the $2M deposit amounts to an attempt to grab cash as Schwartz looks for ways to make payments on a settlement he reached with investors in two crowdfunding deals that collapsed in scandals last year. 

Schwartz is accused of misappropriating $53M from those deals, almost $9M of which was raised for 1601 Washington, and using the funds for personal and business expenses, including a $12M investment in First Republic Bank stock and options weeks before the bank failed. 

“It is because of all these legal issues that the Seller Parties have now objected to the return of the Deposit and filed this lawsuit in a desperate effort to reach [Black Lion’s and Massa’s] money to pay [Nightingale] and Schwartz’s defrauded investors,” Lieberman wrote in the countersuit. 

The failure to close the sale, and the current legal wrangling, hinges on the transfer of the ground lease for the property, a 140K SF office building that is mostly vacant but had been the headquarters for Barry Sternlicht’s Starwood Capital. 

Nightingale claims the buyers failed to obtain a transfer of the ground lease from Miami Beach before the scheduled Nov. 30 closing date. Its suit alleges that Nightingale declined to provide an extension because the buyers “failed to use good faith, diligent efforts” to secure the ground lease as required by the purchase agreement.

RKR Gaia countered in its filing that it had pursued those efforts to obtain the ground lease and was seeking the extension because the Miami Beach City Commission was unable to add the item to its agenda during its November meetings.

In their counterclaim, Black Lion and Massa allege Nightingale committed a range of breaches of contract that nullify the purchase agreement and any claim the seller has to the deposit. 

They allege that Nightingale falsely represented that none of the $8.8M that Nightingale raised on the crowdfunding platform CrowdStreet for 1601 Washington Ave. was invested into Nightingale or the property and that Nightingale owned the building outright. 

The countersuit states that Nightingale said there were no pending or threatened legal actions against the property, the ground lease was in good standing and Nightingale would maintain a $15M net worth. 

“Sellers knew or should have known that those representations were false, but made them to induce the transaction,” the countersuit alleges. 

Attorneys for Nightingale and Schwartz say the developer upheld all of the terms of the purchase agreement and is seeking the $2M deposit, attorney’s fees and interest earned on the cash in escrow. 

The deposit “is to be released and paid to the Sellers automatically upon Defendant's default or material breach of the [purchase agreement] as liquidated damages,” the suit states. 

The sale of 1601 Washington was supposed to be a key piece of the settlement Schwartz struck in October, shortly after the building went under contract.

The attorney representing the CrowdStreet investors in a bankruptcy proceeding told Bisnow at the time that all the money Schwartz raised to renovate the building on the platform would be repaid to the investors from the proceeds of the sale.

Despite the deal for the building falling apart, Schwartz made the first $3M payment in the settlement earlier this month. If he defaults on the next payment, which is scheduled for April, the burned investors could place liens on other pieces of his commercial portfolio, including office buildings in Manhattan and Philadelphia.

Schwartz has also agreed to sell a mansion in New Jersey and his penthouse on the west side of Manhattan to raise the needed cash for the settlement.