Nightingale Pledges to Reimburse CrowdStreet Investors by Selling Off Assets

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Nightingale Pledges to Reimburse CrowdStreet Investors by Selling Off Assets

Nightingale Properties has proposed a settlement with CrowdStreet investors to compensate them for the massive funds misappropriated by the company’s CEO, Elie Schwartz. This move comes after Schwartz mishandled tens of millions over the past year, misleading investors into believing they were purchasing portions of premium office properties.

Details of the agreement: According to sources, investors could anticipate quarterly payments of around $4M for the next three years as Nightingale liquidates parts of its portfolio. This is to cover the capital lost by investors, especially those who thought they were acquiring segments of office buildings in key areas like Atlanta and Miami Beach. Schwartz has committed to placing liens on segments of his commercial real estate collection and his Manhattan residence as a security measure. If he defaults on this payment plan, these assets would be at risk.

Some background: This scandal traces back to last year when Nightingale introduced two crowdfunding deals on CrowdStreet. Over 600 investors got involved with a minimum commitment of $25K each. However, neither of these deals saw completion. Schwartz did manage to refund $9M to a subset of investors between late 2022 and April 2023. Post which, communication between Schwartz and CrowdStreet ceased. It was later revealed that Schwartz used the investor funds on personal and business expenses. Many of these investments, including $12M in First Republic Bank stock, rendered no returns.

➥ THE TAKEAWAY

Path forward: Even though there's a plan for investors to get their money back, it's not a straightforward deal. There are lots of steps and approvals needed from different legal groups, and everything depends on Schwartz (the CEO who misused the funds) following through with his promises. Upcoming talks with CrowdStreet might give more information, but overall, the process of investors recouping their losses is looking to be complicated and uncertain.

Brookfield Secures $12B for Its Largest Private Equity Fund

The Canadian investment giant has done it again. Brookfield Asset Management Ltd. has successfully raised a whopping $12 billion for its largest private equity fund, marking a significant milestone after its recent heavy spending spree.

Breaking records: Brookfield has funneled $3.5B of its own capital into the BCP VI fund, supplemented by backing from pension plans, sovereign wealth funds, and family offices. This unfolds during a period of decelerated M&A engagements amongst private equity giants this year.

On the hunt: Despite the general market trend, Brookfield has not shied away from major acquisitions, making multibillion-dollar deals with notable companies. They have already deployed around $4 billion from this new fund and are eyeing potential deals in the technology and healthcare sectors. Cyrus Madon, the CEO of Brookfield's private equity group, noted that due to high valuations in the past, many tech and healthcare firms aren't performing as expected now, making their valuations more attractive for investments.

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Ambitious growth: Brookfield has secured commitments for its BCP VI private equity fund in one of the toughest fundraising markets since the 08 crisis, where investors have become more selective in allocating capital. Despite this, Brookfield aims to grow its private equity business to match the scale of its other flagship businesses, as it manages a total of $850B across various strategies, including renewables, infrastructure, real estate, and credit.

Record-Setting NYC Office Vacancy Shows No Signs of Slowing

Collier's recent report paints a promising picture for Manhattan's strained office leasing market. However, a deeper investigation reveals continued challenges.

Misleading bounce: Collier's data, spotlighting a 26% uptick in office leasing and a doubling of demand in select areas from Q2, is somewhat dimmed by the looming 19.4% of available office space sprawled across Lower Manhattan, Midtown, and Midtown South. Moreover, the market stares down the considerable challenge of soaking up an extra 43 million square feet of surplus space, equivalent to the entirety of the Financial District.

The impact of megadeals: The data's optimism is primarily buoyed by two significant leases, which account for over a fifth of the jump in leasing activity. Davis Polk and Wardwell's substantial lease at 450 Lexington Avenue and the city government's space at 110 William Street have disproportionally uplifted the numbers, masking an otherwise flat demand.

Leasing velocity: Despite the recent uptick, the YTD leasing velocity for 2023 stands at 19 MSF, a 21.4% decrease compared to the same period in 2022. If demand remains at the current pace, the total leasing volume for 2023 is projected to be nearly 13% lower than the 29 MSF recorded in 2022. Manhattan's FIRE (financial services, insurance, and real estate) sector led leasing with 31% of the activity, followed by the public sector at 23% and the professional services industry at 22%.

Persistent oversupply: Office investment sales in Q3 plummeted by 83% YoY, reaching a mere $200M—one of the lowest quarters on record. Despite a notable increase in tenant demand across sectors, Manhattan's office market continues to wrestle with an oversupply of vacant space due to tenant relocations, which may persist as large blocks of empty space become available. Additionally, the tightening of sublet supply may be short-lived, as potential future property dispositions could reverse this trend.

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Ongoing challenges: Manhattan’s office leasing scenario underscores how headline numbers can obscure the underlying market health. Although the data points towards recovery, an in-depth analysis reveals a market still grappling with excess space and a recovery principally piloted by isolated mega-deals rather than a broad-based revival.

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According to CBRE, older properties are likely to outperform the overall market in terms of rent growth. Annual rent growth surpasses the long-run market average of 2.7% in multifamily properties during their second decade, and it further accelerates, reaching its peak between 3.5–4.0% in the third decade.

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