Weeks after Joshua Zamir’s Capstone Equities initiated a foreclosure on the Nightingale Properties’ Whale Building in Sunset Park, Capstone sued Nightingale’s CEO Elie Schwartz.
Capstone alleges Nightingale defaulted on its $88 million loan for the building and Schwartz breached four guarantees. Capstone is now seeking to enforce those guarantees. The lender also takes aim at two lawsuits filed by Schwartz against Capstone and the prior lender TPG in its lawsuit.
Capstone’s attorney called Nightingale’s lawsuits a “desperate gambit” by Schwartz and a Nightingale affiliate to “obfuscate and escape from their liability under the notes and mortgages and four separate personal guarantees executed.”
PincusCo first reported the news of the lawsuit.
Capstone is still going ahead with its Uniform Commercial Code foreclosure that is set for August 8. Capstone previously floated the idea of converting the space back to industrial space, according to a court filing.
The lawsuit is the latest challenge for Nightingale Properties and Schwartz. The company is facing a foreclosure at its SoHo office building at 300 Lafayette Street from its lender TPG Real Estate Finance. Nightingale’s attempt to close on an office property in Atlanta’s Buckhead neighborhood through crowdfunding also appears to be in trouble as investors seek to get their money back.
Some of Nightingale’s troubles could be attributed to bad timing. The company bought the 420,000-square-foot former Whale Oil Company headquarters in October 2020 from Madison Realty Capital who kept a 25 percent stake in the building. (Madison no longer has a stake, according to a spokesperson).
Nightingale sought to convert the building into creative office space and assumed a $88 million loan that Madison had secured from TPG. Nightingale’s plan had little success as workers continued to work remotely and office leasing came to a halt.
The property was only 27 percent occupied as of October 2022, according to a court filing.
Nightingale fought to keep the property out of its lenders’ hands. It filed two separate lawsuits against its lenders. In January, the firm sued TPG alleging the lender offered it a chance to buy the debt for $60 million — a nearly $20 million discount from the balance. Nightingale alleges TPG breached its agreement and refused to let the developer hire brokers from Cushman & Wakefield, who it claimed were needed for the deal. A judge dismissed all of Nightingale’s allegations, but the firm has filed a notice of appeal.
Nightingale is also suing Capstone, alleging it misused confidential information to buy its loan. Capstone argues that Nightingale couldn’t come up with the money to buy the debt. A judge dismissed Nightingale’s tortious interference claims, a decision Nightingale is also appealing, but allowed its claim of unfair competition to move ahead.