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Nightingale reaches settlement to repay CrowdStreet investors

Founder Elie Schwartz to sell buildings to reimburse money lost in crowdfunding scandal

Nightingale Settles with Outraged CrowdStreet Investors
Illustration of Elie Schwartz and the Atlanta Financial Center (LinkedIn, Transwestern; Illustration by The Real Deal)

Nightingale Properties has reached a settlement to repay CrowdStreet investors just months after millions of their dollars were diverted from their intended real estate deals.

The agreement calls for Nightingale to pay investors $4 million per quarter over the next three years, requiring Nightingale to sell parts of its languishing portfolio, according to Bisnow.

The deal was announced to investors on Wednesday in a webinar hosted by Anna Phillips, the independent manager retained to trace the tens of millions of dollars they put into two Nightingale deals that never closed.

It comes just two weeks after a restructuring officer said Nightingale CEO Elie Schwartz used about $12 million of investor money to bet on First Republic stock and options just before the bank was seized by regulators.

Phillips said the settlement could return all of the investors’ money.

As part of the agreement, Schwartz put liens on his portfolio, including his Manhattan penthouse, his personal home, jewelry, watches and art. Schwartz will have six months to find a source of funds other than the home or he will have to sell it, according to Bisnow.

Schwartz is also obligated to update investors on the status of his asset sales. Nightingale has already agreed to sell 1601 Washington Avenue in Miami Beach for $80 million, which was one of the properties from which Phillips alleges Schwartz misappropriated investors’ money. Phillips said she is also negotiating a settlement with CrowdStreet, but did not provide more details.

The crowdfunding firm, which had come under fire for not ensuring investors’ money went where it was supposed to go, expressed relief at the news.

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“CrowdStreet is encouraged by the update from Anna Phillips that Elie Schwartz has agreed to repay investors in full,” a spokesperson said in a statement. “Today’s news is a positive development in the process toward recovering investor funds, and we remain committed to continuing to advocate for investors as they navigate the steps ahead.”

Phillips said the settlement does not prevent them from going after third-party beneficiaries of the funds, according to Bisnow.

The settlement talks themselves were a surprising turn in the fiasco. In July, Phillips said tens of millions that were supposed to go into Nightingale office deals in Miami Beach and Atlanta were instead “misappropriated” by Schwartz.

Phillips put two of the entities controlling the investors’ money into bankruptcy in an effort to recover the missing millions. The fiduciary later said the FBI and the Department of Justice were looking into the matter.

Phillips said both agencies are aware of the settlement deal, according to Bisnow.

Nightingale is facing issues outside of its CrowdStreet deals. Its assets under pressure include a Chicago office building and properties in Philadelphia, Brooklyn and Manhattan.

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CrowdfundingElie SchwartzForeclosuresNightingaleReal Estate Lawsuits