RAPID CITY, S.D. — A contested deal to refinance a South Dakota apartment portfolio tied to Tzadik principal Adam Hendry was pushed back to September, after a judgment creditor formally objected to the deal and a broker separately asked the court to resolve a related deadline question, at a hearing Monday before Judge Mindy A. Mora of the U.S. Bankruptcy Court for the Southern District of Florida.

Both disputes were continued to a non-evidentiary hearing on September 8 at 10:00 a.m., at the Flagler Waterview Building in West Palm Beach, according to a notice filed with the court following Monday’s hearing.

The refinancing deal at the center of it

The underlying dispute involves a recapitalization and refinancing transaction the Reorganized Debtors asked the court to approve in a motion filed August 24.

Under the proposal, Hendry and the other current equity holders of the Tzadik entities would “sell” their membership interests to a holding company, which would then convey the underlying properties — including Star Village and Aspen Park in Rapid City — to a new set of Delaware-based entities owned by those same equity holders, including Hendry himself.

In exchange, Morgan Stanley would provide a $66.5 million refinancing loan, most of which would go toward a $60 million payment to Merchants Bank of Indiana, the properties’ senior secured lender.

A judgment creditor calls it an insider deal

Alejandro Arguelles and Gatoralex Consulting, LLC, which are owed more than $10.6 million by Hendry under a 2024 Miami-Dade County judgment, filed a formal objection August 30 arguing the transaction is designed to let Hendry and his partners keep the properties while creditors go largely unpaid.

Gatoralex holds a secured lien against real estate owned by one of the Reorganized Debtors, Tzadik Sioux Falls Portfolio III, LLC, that it says now exceeds $11.5 million — against which the proposed deal would pay Gatoralex just $900,000, according to the objection.

Gatoralex also holds a February 2025 charging order against Hendry’s membership interests in several Tzadik entities, including Rapid City Portfolio I, where Hendry owns a 69% stake and serves as manager, according to a separate docket filing cited in the objection.

The objection argues the deal violates the terms of the Reorganized Debtors’ confirmed Chapter 11 plan, violates the bankruptcy principle known as the absolute priority rule, interferes with Hendry’s own separate personal Chapter 11 case, and amounts to an insider transaction that should face heightened court scrutiny under case law cited in the filing.

A broker’s deadline gets caught in the same tangle

A second, less adversarial dispute has been folded into the same September 8 hearing.

Brad Stearns, a South Dakota real estate broker with 605 Real Estate, filed a pro se letter with the court on August 14 stating he was retained under a court-approved listing agreement to market the properties involved in the bankruptcy — and that his efforts “resulted in the pending sale transaction that the Debtors are now attempting to complete.”

Stearns isn’t opposing the transaction. His letter says plainly that he takes “no position regarding the modifications agreed upon between the Debtors and MBI,” and that he isn’t asking the court “to interfere with or delay the pending transaction.”

His concern is narrower: an August 3 agreed order between the debtors and Merchants Bank gave the debtors until August 31, 2026 to complete a sale or refinancing transaction, but didn’t extend the deadline tied to his own brokerage engagement — meaning his rights to a commission on the deal he says he sourced could lapse before the debtors’ own deadline does.

He’s asking the court to extend his deadline to match theirs, through August 31.

What’s next

Because Gatoralex’s filing is a preliminary objection from an adverse creditor, its allegations have not been tested or ruled on by the court, and the Reorganized Debtors have not yet filed a public response.

The court’s decision to continue rather than rule on either matter Monday leaves the refinancing deal — and, by extension, whether it moots a previously approved auction track for Star Village and Aspen Park — unresolved heading into September.

Sourcing

This report is based on court filings in Lead Case No. 25-13865-MAM, U.S. Bankruptcy Court, Southern District of Florida, including Doc. 808, Doc. 814, Doc. 822, Doc. 831, and Doc. 832.

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