AvantGarde Senior Living - Chapter 11 Case Summary

Business Description

AvantGarde Senior Living ("AGL"), together with its affiliate Adelman Tarzana Investments, LLC ("ATI," and collectively with AGL, the "Debtors"), owns and operates a residential care facility known as AvantGarde Senior Living of Tarzana (the "Facility"), located at 5645 Lindley Ave., Tarzana, California (the "Real Property"). The Facility provides care to its residents 24 hours a day, seven days a week, 365 days a year.

• AGL operates the Facility, while ATI owns the Real Property upon which the Facility is located. Accordingly, ATI is often referred to as the "Propco," while AGL is often referred to as the "Opco."
• The Debtors operate under an operating lease pursuant to which AGL leases the Real Property from ATI to operate the Facility. The rents paid under the lease allow ATI to service its debts to its creditors, including its mortgage lender.

The Debtors are 100% owned by Jason Michael Adelman, who serves as the sole member and director of AGL and the sole member and managing member of ATI. AGL generated gross revenue of approximately $8 million in 2025 and approximately $7.5 million in 2024.

Between 2015 and 2019, the Facility underwent a nearly complete rebuild and renovation, which utilized high-quality materials and updated the ADA-compliant building.

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Operations Overview

The Facility is licensed by the California Department of Social Services for 160 beds and, as of the Petition Date, was almost fully occupied. According to the Debtors, the quality of care provided at the Facility has been reflected in an industry low of only four minor substantiated complaints over the past few years.

Workforce and Employee Benefits

As of the Petition Date, the Facility was staffed by approximately 82 full- and part-time employees. AGL has 82 non-insider employees currently on its payroll (the "Employees"), who are paid on a semi-monthly basis, on the 10th and the 25th of each month and approximately two weeks in arrears.

• In the ordinary course of business, AGL offers a variety of employee benefit programs to certain of its Employees, including, among others, a 401k program and a health insurance program.
  • AGL funds a portion of the Employees' health insurance benefits, approximately 50% of premiums, up to $500 per employee.

Utilities and Cash Management

In connection with the operation of its business, AGL receives water, electricity, telephone, trash, and/or similar utility services from a number of utility companies (collectively, the "Utility Companies"). As of the Petition Date, the Debtors maintained, and continue to maintain, accounts at J.P. Morgan Chase Bank, N.A. ("Chase Bank") and WaFd Bank.

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Prepetition Obligations

ATI's primary asset is the Real Property, while AGL's primary assets are comprised of its leasehold interest in and to the Real Property and the Facility; its accounts receivable—a combination of receivables payable under California's MediCal/Medicaid Assisted Living Waiver (ALW) program and private payors—totaling approximately $1.2 million as of the Petition Date; and its operating cash and fixed assets, including furniture and equipment.

PGIM Mortgage Loan

• ATI's liabilities are comprised primarily of its mortgage loan obligation to PGIM Real Estate Agency Financing, LLC ("PGIM"), which is currently in default in the amount of approximately $1.1 million.
  • On or about April 1, 2022, ATI obtained the loan from PGIM by executing and delivering a Healthcare Facility Note (Multistate) (the "Note") in the principal amount of $31,293,900, the proceeds of which were used to refinance the Real Property. The Note was issued pursuant to, and is insured by, the U.S. Department of Housing and Urban Development ("HUD"), making it a HUD-insured loan.
  • The Note is secured by, among other documents, a Healthcare Deed of Trust, Assignment of Leases, Rents, and Revenue and Security Agreement, dated April 1, 2022, encumbering the Real Property. AGL also executed and delivered an Operator Security Agreement pledging its assets as additional collateral for the Note, and PGIM recorded UCC-1 financing statements against the Debtors with the California Secretary of State covering substantially all of their assets.

IRS Tax Liabilities

• AGL may also have unpaid tax liabilities owed to the Internal Revenue Service ("IRS," and together with PGIM, the "Secured Creditors") in the amount of at least $1.3 million. The IRS recorded two Notices of Federal Liens against AGL with the California Secretary of State covering substantially all of its assets, asserting unpaid tax liabilities of $211,948.14 and $1,077,350.51, for a total of $1,289,298.65.
  • AGL disputes these liabilities, and an IRS collection due process appeal has been pending for over a year.

Unsecured Claims

• AGL's remaining liabilities are comprised of unsecured debt obligations owed to various vendors, service providers, and state agencies, in the range of $350,000 to $650,000 as of the Petition Date.

Cash Collateral and Adequate Protection

The Debtors believe that the only parties which may have valid interests in the Debtors' cash are PGIM and the IRS (the latter only as to the cash of AGL). Based on the existing liens, all of the Debtors' post-petition revenue and income may constitute the "cash collateral" of PGIM, and AGL's post-petition revenue may constitute the "cash collateral" of the IRS pursuant to 11 U.S.C. § 363(a).

• PGIM is owed approximately $1.1 million, secured by, among other things, ATI's Real Property and all of AGL's assets, which together total approximately $41 million. As adequate protection, ATI proposes to pay PGIM monthly payments of approximately $165,000 during its bankruptcy case.
• The IRS may be owed approximately $1.3 million, which is disputed and secured by AGL's assets which—based on the current values of the AR and other assets of AGL and equity from any sale of the Facility—exceed such amount.

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Events Leading to Bankruptcy

Prepetition Disputes with PGIM

On or about April 14, 2026, PGIM filed a complaint against the Debtors in the Superior Court for the County of Los Angeles for, among other things, breach of contract and the appointment of a receiver. In its complaint, PGIM asserts that ATI is behind approximately $2.6 million under the Note.

• The Debtors dispute this assertion based on, among other things, PGIM's failure to credit ATI for payments that have been made toward repayment of the Note but not applied by PGIM. ATI contends that it currently owes approximately $1.1 million to PGIM under the Note, and a reconciliation of all payments made and current balances has been requested several times by the Debtors, which PGIM has yet to provide.
• PGIM also moved, on an ex parte basis, for the appointment of a receiver over the Real Property and the Facility. On June 11, 2026, the state court held a hearing on PGIM's ex parte application and took the matter under submission; by the end of that day, the state court issued an order granting the ex parte application.

The Chapter 11 Filing

The Debtors each filed a voluntary petition under chapter 11 of the Bankruptcy Code on June 29, 2026 (the "Petition Date"), and have since operated their businesses and managed their affairs as debtors in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.

• The Debtors filed their cases to avoid having a receiver take over their entire businesses and assets, which they contend would only benefit PGIM—which the Debtors believe is oversecured by the value of their respective assets—at the expense of and to the prejudice of other creditors.
• According to the Debtors, the filing was necessary not only to preserve the value of their assets, but also to avoid displacement of the Facility's residents and disruption to the care and services that AGL must provide on a daily basis.

Asset Values and Marketing Efforts

Contemporaneously with the PGIM transaction, in April 2021, an appraisal of the Real Property and Facility found that the fair market value of these assets was $39,200,000. The Debtors note that this appraisal was taken during the Covid pandemic, when, due to the health crisis—particularly in residential centers—the Debtors experienced lower revenue.

• Since the pandemic, the Facility has increased occupancy of its existing beds, added 22 additional beds, and benefited from increases in the rates of reimbursement received by the Facility, all of which have contributed to higher revenue and increased value of the Debtors' assets.
• Pre-petition, the Debtors engaged Northmarq, a national commercial real estate brokerage firm, to prepare an offering memorandum in an effort to sell the Real Property and the Facility, together with another residential care facility and related real property located in La Jolla owned by a non-debtor affiliate of the Debtors. Based on extensive analysis and due diligence, Northmarq estimated the value of the Real Property and the Facility at $45,803,882.
• The sale and marketing efforts have led to offers for the two facilities. The Debtors are confident that the Real Property and the Facility will be sold in the next few months and that PGIM (and the IRS) will be paid their allowed secured claims, if any, in full from the proceeds of the sale.

Go-Forward Strategy

The Debtors concluded that they are in need of the protections and breathing room afforded by the chapter 11 process in order to preserve operations and possession of their assets, address their pending disputes with PGIM and the IRS, and formulate a reorganization plan that pays the Debtors' creditors using revenue generated by their assets and proceeds from the sale of their assets. The Debtors are confident of their ability to successfully reorganize if they are able to continue to operate the Facility, maintain possession of the Real Property, continue to care for residents, and generate money to pay creditors' claims.