Rapid City SD – A joint motion now pending before a federal bankruptcy judge asks the court to send Star Village and Aspen Park to online auction in late October — but whether that auction ever happens may be decided a month earlier, and in a very different way.

Merchants Bank of Indiana (MBI) and five reorganized Tzadik-affiliated debtors filed the motion August 14, asking Judge Mindy A. Mora to approve bid procedures, employ a broker and auctioneer, and schedule an auction of eight real properties — six in Sioux Falls, two in Rapid City — for the benefit of MBI under a settlement folded into the debtors’ already-confirmed Chapter 11 plan.

A hearing is set for Wednesday, August 26, at 11:00 a.m. in West Palm Beach.

But the auction motion is a contingency, not the main event.

Under a separate agreed order the judge signed August 3, the debtors have until noon Central time on August 31 to close a refinance or sale that nets Merchants Bank $60 million or $70 million, respectively. If they do, the auction question goes away. If they don’t, MBI gets to choose between forcing the properties to auction or simply taking title outright.

What the motion actually asks for

The August 14 filing (Doc. 812 in the jointly administered case) is a proposed order attached to a motion — not, as of this writing, a ruling. It asks the court to:

• Approve Colliers International MN as real estate broker and Ten-X, LLC as auctioneer, both taking direction solely from MBI
• Approve bid procedures for an online timed auction running October 26–28, 2026, with a final sale hearing on or about October 29
• Sell the properties “AS-IS, WHERE-IS,” free and clear of all junior liens, claims and encumbrances
• Authorize MBI to credit bid up to $79,636,621.12 — the full amount of its petition-date secured debt

The proposed order includes language stating the motion is “GRANTED IN ITS ENTIRETY” and all objections “OVERRULED and DENIED” — but that’s the relief the movants are requesting, not language a judge has signed. The hearing where that gets decided is Wednesday.

Also on the bid-procedures track: a Stalking Horse Bid Deadline of October 1, 2026, an Auction Qualification Deadline of October 28 at 11:00 a.m., and a break-up fee for any stalking horse bidder capped at 1% of that bid.

The full Bid Procedures exhibit — which would spell out minimum bid and deposit requirements — wasn’t part of the record we reviewed; those terms aren’t included here.

The properties, and what they’re worth

Star Village (96-plus parcels along Signal Drive and Crescent Drive) and Aspen Park (two parcels on East Fairmont Boulevard) are owned by Tzadik Rapid City Portfolio I, LLC — 178 units and 81 units, respectively, according to the broker’s own property schedule attached to the motion, for 259 units combined.

The other six properties in the package, all in Sioux Falls, range from 30 units (Woodstone) to 248 units (Taylor’s Place).

Court schedules put combined real estate value for the Rapid City entity at $24.7 million, against $11,473,991 in Merchants Bank of Indiana secured debt against that specific entity — figures drawn directly from the debtor’s Schedule D, filed May 2025.

That gap matters for the “why now” framing: this isn’t a case of debt exceeding value. It’s a liquidity problem.

The debtors’ Chapter 11 plan was confirmed back on May 19, 2026; this sale mechanism exists because, under the settlement, the debtors haven’t been able to pay MBI down on the schedule the settlement requires — hence the refinance-or-sale race now underway.

How we got here

Rapid City Portfolio I and four Sioux Falls-area affiliates filed Chapter 11 in April 2025, jointly administered under a lead case that has since changed hands: originally assigned to Judge Craig A. Pugatch, the case was reassigned at some point before this August’s filings to Judge Mora, whose courtroom now hears essentially the entire matter.

The plan confirmed May 19, 2026. The individual cases were administratively closed in late June. Then, on August 3, Judge Mora signed an agreed order between MBI and the debtors resetting the terms: the debtors would get until August 31 to complete a refinance ($60 million) or sale ($70 million) of the Rapid City and Sioux Falls III properties, in exchange for continuing $100,000/month payments to MBI in the meantime.

If that window closes without a deal, MBI can direct the debtors to sign auction contracts with Ten-X and Colliers — which is exactly the motion now pending for Wednesday.

A wrinkle that’s actually a data point

One filing connected to this motion is captioned as an objection — but reads like a data point.

Brad Stearns, a South Dakota broker with 605 Real Estate who was previously court-approved to market these properties, filed what’s formally titled a “Limited Objection and Request for Clarification or Modification” on August 14.

In substance, though, it isn’t adversarial: Stearns writes that he is “not asking the Court to interfere with or delay the pending transaction,” and asks only that his own brokerage-engagement deadline be extended to match the debtors’ new August 31 window.

He states plainly that his marketing work “resulted in the pending sale transaction that the Debtors are now attempting to complete.”

That’s a real detail, not a hypothetical: there is an active, non-auction transaction in motion right now, working against the same August 31 deadline that determines whether the Ten-X auction ever gets triggered at all.

The court has set Stearns’ request for a 10-minute, non-evidentiary slot on the same Wednesday calendar — consistent with a housekeeping matter, not a fight.

One front in a wider portfolio-wide reckoning

Star Village isn’t the only Tzadik-linked matter on Judge Mora’s Wednesday calendar.

Earlier that same morning, in a separate case (No. 26-20751, filed this year), the court is set to hear BankWest’s emergency motion to dismiss the Tzadik Mount Rushmore Hotel bankruptcy under 11 U.S.C. § 1112(b), along with BankWest’s companion motion for relief from the automatic stay.

Combined, nearly the entire Tzadik/Hendry portfolio is now moving through bankruptcy court in front of the same judge.

What to watch

• Wednesday, August 26, 11:00 a.m.: Hearing on the bid-procedures motion (Doc. 812) and Stearns’ limited objection/clarification request (Doc. 814), Room 801, Flagler Waterview Building, West Palm Beach.
• August 31, 2026, 12:00 p.m. CST: Deadline for the debtors to close a refinance or sale, or the auction track activates.
• If the auction track activates: contracts with Ten-X and Colliers execute September 1; marketing begins on or after that date; auctions run October 26–28; final sale hearing on or about October 29.

Sourcing: PACER, case 25-13865-MAM (jointly administered), Docs. 699, 773, 808, 812, 813, 814, 816; case 25-14655, Doc. 23 (Schedules, filed 5/12/25). Cross-referenced to prior reporting on the Rushmore Hotel bankruptcy, the BankWest dismissal fight, and the Hendry personal bankruptcy.

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The Tzadik Mount Rushmore Hotel Files for Bankruptcy -And the Paperwork Wasn’t Even Signed

Three Courtrooms, One Empire: Inside the Bankruptcy Fight Now Deciding the Fate of the Rushmore Hotel and an $86 Million Dollar Ranch in Pennington County

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