Capstone’s suit comes weeks after Joshua Zamir’s Capstone Equities initiated foreclosure on Nightingale Properties’ Whale Building in Sunset Park Elie Schwartz, CEO of Nightingale.
Capstone accused Nightingale of defaulting on an $88 million loan for the building, while Schwartz breached four guarantees. Capstone is currently seeking to enforce these guarantees. The lender is also targeting Schwartz in two lawsuits filed against Capstone and former lender TPG in the suit.
Capstone’s attorneys called Nightingale’s lawsuit a “desperate tactic” by Schwartz and Nightingale’s affiliates to “obfuscate and evade four separate individual Liability under the Guarantee”.
PincusCo first reported news of the lawsuit.
Capstone is still continuing to foreclose under the Uniform Commercial Code, with a foreclosure scheduled for August 8. Capstone previously floated the idea of converting the space back into an industrial space, according to a court filing.
The lawsuit is the latest challenge facing Nightingale Properties and Schwartz. The company’s SoHo office building at 300 Lafayette Street is facing foreclosure from its lender, TPG Real Estate Finance. Nightingale’s attempt to crowdfund the closure of an office building in Atlanta’s Buckhead neighborhood also appears to be running into trouble as investors seek to get their money back.
Some of Nightingale’s troubles may have been due to bad timing. The company purchased the 420,000-square-foot former Whale Oil headquarters in October 2020 from Madison Realty Capital, which owns a 25 percent stake in the building. (Madison no longer owns a stake, according to a spokesperson).
Nightingale attempted to convert the building into creative office space and took on Madison’s $88 million loan from TPG. Nightingale’s plan had little effect as workers continued to work remotely and office leasing ceased.
Occupancy at the property is just 27% as of October 2022, according to court documents.
Nightingale worked hard to keep the property out of the hands of lenders. It has filed two separate lawsuits against its lenders. In January, the company sued TPG, alleging that the lender offered it the opportunity to buy the debt for $60 million — a discount of nearly $20 million to the balance. Nightingale accused TPG of violating the agreement and refusing to let the developer hire brokers from Cushman & Wakefield, which the firm claimed were needed for the deal. A judge dismissed all of Nightingale’s allegations, but the company has filed a notice of appeal.
Nightingale also sued Capstone, alleging it misused confidential information to purchase loans. Capstone argued that Nightingale could not come up with the funds to buy the debt. The judge dismissed Nightingale’s accusation of infringement and interference, and Nightingale also appealed the judgment, but allowed his unfair competition allegation to proceed.