DAMIS Holdings - Chapter 11 Case Summary

Business Description

DAMIS Holdings LLC, along with its Debtor affiliates (collectively, the "DAMIS Debtors"), owns, leases, and operates a highly diversified portfolio of real estate holdings, buildings, and related assets across the United States. The DAMIS Debtors' core business consists of acquiring, leasing, and operating these properties.

• The DAMIS Debtors are indirect subsidiaries of SIMAD Holdings, Ltd. (the "Parent Company"), a holding company organized under the laws of the British Virgin Islands.
• They form part of a broader group of entities ultimately owned by brothers Michael and David Shabsels (the "Shabsels Brothers"), known collectively as the DAMIS-SIMAD Enterprise.

The DAMIS Debtors own or lease approximately 55 properties (the "Properties") located across 23 states: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Maine, Massachusetts, Michigan, Missouri, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Texas, Virginia, and West Virginia.

The portfolio spans a range of asset classes, including:

• Hotels and Lodging: Including Rocking Horse Ranch Resort, an all-inclusive family resort located roughly 90 miles north of New York City, offering a range of indoor and outdoor activities.
• Leisure: Including SplashDown Beach, a waterpark located in New York.
• Multifamily: Primarily apartment buildings with units spanning affordable and high-end price points.
• Retail: Shopping complexes, often anchored by large, brand-name commercial tenants.
• Office: Office buildings housing a variety of business tenants.
• Medical Office: Facilities occupied by dental practices and surgical oncology providers.
• Industrial: Warehouses and manufacturing facilities.

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Corporate History

The DAMIS Debtors sit within the broader DAMIS-SIMAD Enterprise, which comprises the various subsidiaries and affiliates ultimately owned by the Shabsels Brothers. The Enterprise is organized into three groups:

• The DAMIS Debtors, which hold the real estate portfolio;
• The SIMAD Debtors, certain affiliates of the DAMIS Debtors that own and operate summer camps, whose chapter 11 cases are being separately administered by the Court under Case No. 26-16388 (CMG); and
• Certain non-debtor affiliates.

Equity Ownership

As of the Petition Date, David Shabsels and Michael Shabsels each held 50% of the outstanding limited liability company interests in DAMIS Holdings LLC.

Ownership of the Properties

The DAMIS Debtors' portfolio comprises a mix of properties that are either owned outright or held subject to long-term ground leases, falling into two categories:

• Owned Properties: The DAMIS Debtors hold fee simple interests in 18 properties across 13 states (Alabama, Arkansas, California, Connecticut, Florida, Georgia, Indiana, Massachusetts, New York, Ohio, Oklahoma, Tennessee, and Virginia). Acquired between 2016 and 2022, these include hotels, industrial properties, medical offices, multifamily apartment buildings, office buildings, retail, and mixed-use properties. The DAMIS Debtors are obligated on mortgages (the "Fee Mortgages") secured by these properties.
• Leased Properties: Fee simple interests in the remaining properties are held by non-debtor entities (each, a "Non-Debtor Fee Holder") that are not controlled by — but may be affiliates of — the DAMIS Debtors. Many of these Non-Debtor Fee Holders are owned, directly or indirectly, by the Shabsels Brothers, by trusts established for their family members, by Leeton Real Estate, Inc. (an entity controlled by Mark Graham, a longstanding business partner of the Shabsels Brothers), or by some combination of these parties.

Typical Acquisition and Financing Structure

The DAMIS Debtors' interests in the Leased Properties generally arose through a standardized, multi-step process. Using an illustrative $10 million target property:

• A Non-Debtor Fee Holder would enter into a purchase agreement to acquire a target property from a third-party seller (the "Initial Acquisition") — for example, at a $10 million purchase price.
• The Non-Debtor Fee Holder would then sell certain interests to two DAMIS Debtor entities through separate sale agreements (the "Secondary Acquisitions"), each subject to a 99-year ground lease (a "Ground Lease"):
  • A "LandCo Debtor" would acquire the buildings, improvements, personalty, and related rights; and
  • An "OpCo Debtor" would acquire the rights under all pre-existing tenant and space leases.
• The aggregate amount payable by the DAMIS Debtors under the sale agreements would be less than the price paid by the Non-Debtor Fee Holder to the seller — for example, $8 million versus $10 million.

The two acquisitions were financed separately and typically closed simultaneously, with the loan proceeds used to fund the purchase price:

• The DAMIS Debtors obtained acquisition financing secured by the acquired assets (a "Leasehold Mortgage"), typically at a loan-to-value ratio of 65–75% (approximately $5.2 million to $6 million in the illustration). The LandCo and OpCo Debtors generally serve as borrowers, with other DAMIS Debtors, non-debtor affiliates, or the Shabsels Brothers acting as guarantors or pledgors.
• The Non-Debtor Fee Holder obtained financing secured by its fee simple interest (a "Non-Debtor Fee Mortgage"), typically equal to 40% of the purchase price (approximately $4 million). These loans — often short-term bridge financing intended to be refinanced into permanent mortgages — do not constitute obligations of the DAMIS Debtors.

Following closing, the fee interest remained with the Non-Debtor Fee Holder, the buildings and improvements were held by the LandCo Debtor, and the tenant leases were held by the OpCo Debtor — each subject to the Ground Lease. Rent collected by the LandCo and OpCo Debtors services the Leasehold Mortgage, while ground rent paid to the Non-Debtor Fee Holder services the Non-Debtor Fee Mortgage.

As of the date of the Declaration, the Debtor Advisors were not in a position to provide an informed estimate of the value of the Properties. The property values that supported issuance of the Fee Mortgages, Leasehold Mortgages, and Non-Debtor Fee Mortgages — along with other financial transactions and relationships — remain the subject of active investigation by the Debtor Advisors.

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Operations Overview

The DAMIS Debtors' business centers on the acquisition, operation, management, development, and leasing of income-generating commercial, residential, and industrial real estate and related assets.

Revenue Sources

The DAMIS Debtors' primary revenue source is base rental income generated from leases in effect at both the Owned Properties and the Leased Properties. Additional revenue is derived from:

• Resort and lodging operations; and
• Ancillary sources, including facility rentals, parking payments, and food and beverage sales.

Workforce

The DAMIS Debtors directly employ a limited number of individuals, who generally serve in corporate functions — including legal, operations management, accounting, and treasury — that support the business as a whole. These employees possess specialized knowledge, skills, and experience critical to the DAMIS Debtors' ability to operate in the ordinary course.

Property Managers

To supplement their workforce, the DAMIS Debtors rely on various third-party property managers (the "Property Managers") to oversee day-to-day operations at the Properties. Their services include:

• Managing the Properties;
• Collecting rent from tenants and facilitating deposits into the DAMIS Debtors' operating accounts;
• Overseeing maintenance and arranging any necessary emergency repairs; and
• Coordinating with, and making payments on behalf of the DAMIS Debtors to, third-party service providers such as security firms, cleaning crews, utility providers, insurance carriers, and other vendors and suppliers.

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Prepetition Obligations

As of the Petition Date, the DAMIS Debtors separately estimate their prepetition obligations at approximately $466 million in mortgage debt, $1.1 million in SBA (EIDL) disaster loans, $134 million in merchant cash advance obligations, and $52 million in general unsecured claims — totaling roughly $653.1 million. The information remains preliminary and subject to further review, and the Debtors reserve all rights as to the validity, extent, and amount of any putative secured claim. The DAMIS Debtors' prepetition capital structure is summarized below:

Mortgage Obligations

• The Debtors’ prepetition secured indebtedness under the Fee Mortgages and Leasehold Mortgages (together, the “Mortgages”) consists of an aggregate principal amount of approximately $466 million owed to various lenders.
  • The Debtor Advisors continue to review title reports obtained for each Property and its associated Assets to confirm the current holders and servicers of all Mortgages, as well as any other recorded liens against the Properties and Assets.

Small Business Administration Loans

• Following the onset of the COVID-19 pandemic, fourteen of the DAMIS Debtors obtained secured financing under the Economic Injury Disaster Loan (EIDL) program administered by the U.S. Small Business Administration, with approximately $1.1 million outstanding as of the Petition Date.
  • The EIDL Loans were issued in principal amounts ranging from approximately $35,000 to $180,000, generally mature 30 years from issuance, and are secured by all of the borrower’s tangible and intangible personal property, among other collateral.

Merchant Cash Advances

• Certain of the DAMIS Debtors are parties to revenue-based financing arrangements known as merchant cash advances (MCAs), which provide short-term funding to satisfy working-capital needs in the ordinary course of business. Approximately $134 million in MCA obligations remained outstanding as of the Petition Date.
  • The governing agreements generally entitle the MCA Lenders to contractually determined percentages of specific Debtors’ receivables, which the lenders acquire at a significant discount, recovering amounts due through continual periodic withdrawals from the Debtors’ bank accounts until repaid in full.
  • The MCA obligations are often guaranteed by numerous DAMIS Debtor entities, SIMAD Debtor entities, non-debtor affiliates, and the Shabsels Brothers.

General Unsecured Obligations

• The Debtors estimate approximately $52 million in outstanding unsecured obligations as of the Petition Date, consisting primarily of amounts due to trade vendors and other creditors, along with unsecured loans extended by various individuals to certain of the Debtors—many of which are personally guaranteed by the Shabsels Brothers.
  • The Debtors intend to refine this estimate in connection with the preparation of their schedules of assets and liabilities and statements of financial affairs.

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Events Leading to Bankruptcy

Defaults and the Decision to File

• The chapter 11 filings of certain SIMAD Debtors were precipitated by a default under a publicly held bond issuance (the “SIMAD Debentures”), triggered by their failure to make a scheduled interest payment on May 31, 2026. Recognizing that they could not satisfy their funded-debt obligations or avoid extensive operational disruption outside of bankruptcy, the SIMAD Debtors and the DAMIS Debtors commenced their chapter 11 cases on June 4, 2026.
• The DAMIS Debtors faced a parallel liquidity crisis, with cash on hand having fallen far below the levels required to meet near-term debt service under the Mortgages, fund payroll, and cover other essential operating expenses:
  • As of the date of the Declaration, the DAMIS Debtors held approximately $10.3 million in cash—an amount still insufficient to fund debt-service payments and operating expenses.
• Contagion risk across the enterprise made a coordinated filing necessary:
  • Certain Mortgage Loan Documents and MCA Agreements contained cross-guaranty and/or cross-default provisions that—if triggered by the SIMAD Debtors’ default under the SIMAD Debentures, defaults under the SIMAD Debtors’ merchant cash advance arrangements, or the Shabsels Brothers both seeking bankruptcy protection—could have allowed Mortgage Lenders and MCA Lenders to pursue remedies against the DAMIS Debtors outside of chapter 11.
  • Given the extensive intercompany relationships and obligations among the DAMIS Debtors, the SIMAD Debtors, and their non-debtor affiliates, commencing the Chapter 11 Cases was necessary to avert catastrophic business disruption and a potentially enterprise-wide loss of access to cash.

MCA Cash Sweeps and the Petition Date

• In the days immediately preceding the Petition Date, certain DAMIS Debtors defaulted on their MCA Obligations, prompting several MCA Lenders to exercise their rights under the applicable MCA Agreements and begin sweeping cash from the DAMIS Debtors’ bank accounts.
• To stem these sweeps and stabilize liquidity, the DAMIS Debtors appointed the CRO and shortly thereafter authorized the filing of the Chapter 11 Cases—securing the protection of the automatic stay and an orderly, transparent, court-supervised process to address their liquidity issues.

Prepetition Investigation

• The CRO and the Debtor Advisors intend to investigate the full scope of the circumstances that led to the filings, with particular emphasis on prepetition intercompany transactions among the DAMIS Debtors, the SIMAD Debtors, their non-debtor affiliates, the Shabsels Brothers, and the Non-Debtor Fee Holders, as well as any related misconduct. Updates will be provided to the Court and parties in interest as additional information becomes available.

Postpetition Stabilization and Asset Assessment

• Filed on a free-fall basis—with no concluded prepetition restructuring negotiations and no plan support agreement in place as of the Petition Date—the immediate priority has been to stabilize operations and conduct a comprehensive assessment of the Assets, which span retail properties, multifamily residential units, and office buildings across the United States. Across the ninety (90) DAMIS Debtors, the CRO and advisors have been:
  • Reviewing each entity’s organizational structure, governing documents, and prepetition contractual obligations—including leases, financing agreements, and encumbrances—to map its legal and capital structure;
  • Conducting property-level operational reviews of occupancy levels, rent rolls, operating expenses, and cash flows;
  • Engaging licensed appraisers and real estate professionals to perform independent valuations of the Assets on both a standalone and portfolio-wide basis; and
  • Evaluating each Debtor’s operational viability to determine whether individual Assets should be retained and restructured as a going concern or marketed and sold under section 363 of the Bankruptcy Code for the benefit of the estates and creditors.
• The assessment remains ongoing, with a fuller view of the Assets’ composition, value, and viability expected in the coming weeks; the relief sought in the First Day Motions is intended to preserve estate value and equip the CRO to complete this work.

Governance and Control

• To safeguard the restructuring, the CRO relieved the Shabsels Brothers of all decision-making authority over the DAMIS Debtors. However, the CRO has been unable to obtain the signatures needed for the Shabsels Brothers to relinquish their authority as signatories on the DAMIS Debtors’ bank accounts.
  • Accordingly, the DAMIS Debtors seek authority through the Cash Management Motion to replace the Shabsels Brothers as signatories on each of the Bank Accounts and protect estate assets during the cases.

Independent Directors and Professionals

• Immediately prior to the Petition Date, two disinterested directors—Mr. Bernard Katz and Ms. Jill Frizzley (the “Independent Directors”)—were appointed to the board of DAMIS Holdings LLC, replacing the Shabsels Brothers in all governance matters and tasked with ensuring independent decision-making throughout the cases.
  • Ms. Frizzley currently serves as a director of Trinseo Plc and has previously sat on the boards of QVC, Inc., certain affiliates of Harvest Sherwood Food Distributors, Inc., Invitae Corporation, Virgin Orbit Holdings, Inc., Surgalign Holdings, Inc., Avaya Holdings Corporation, and Hudson Technologies, Inc.
  • Mr. Katz brings more than 40 years of forensic accounting and corporate restructuring advisory experience, having served as an independent director of Modell’s, Hollister Construction, George Washington Bridge Bus Station Development, DeVault Foods, Bett-A-Way Holdings, and Princeton Alternative Investment Funds, among others.
• Subject to Court approval, the DAMIS Debtors expect to engage additional independent professionals in the weeks ahead:
  • An independent forensic accountant to examine the DAMIS Debtors’ historical financials and prepetition transactions, including intercompany dealings with the SIMAD Debtors, non-debtor affiliates, and entities controlled by the Shabsels Brothers; and
  • A strategic real estate consultant to provide appraisals and support a strategic review of the portfolio, with the DAMIS Debtors continuing to evaluate candidates.

Automatic Stay Violations

• Among the most urgent priorities is addressing numerous automatic stay violations by MCA Lenders since the Petition Date. Despite the stay, various MCA Lenders have attempted to sweep cash from the DAMIS Debtors’ accounts following purported defaults and have contacted tenants demanding that future rent be paid directly to the lenders rather than to the DAMIS Debtors as their leases require.
  • By way of example, on June 12, 2026—eight days after the filing—The Merchant Marketplace Holdings (“MMH”), an MCA Lender, issued a Notice of UCC Demand and Request for Accounts Receivables (the “MMH Demand Letter”) to a tenant of Matteson Center Real Estate LLC and DAMIS Holdings LLC. The letter asserted that, due to alleged defaults, those Debtors’ accounts “now belong to The Merchant Marketplace Holdings” and instructed the tenant to withhold funds and remit them directly to MMH.
  • On June 17, 2026, the DAMIS Debtors notified MMH by email (and by overnight mail the following day) that such collection efforts violate the automatic stay, and proposed counsel Faegre Drinker separately contacted MMH's counsel by email the same day. As of the Declaration date, neither MMH nor its counsel had responded.
• On June 17, 2026, the DAMIS Debtors sent similar notices to all MCA Lenders, demanding immediate return of any funds debited since the Petition Date. With the assistance of proposed claims and noticing agent Kroll Restructuring Administration LLC, the DAMIS Debtors also advised more than 300 tenants at affected Properties that rent remains payable solely to the DAMIS Debtors and must not be redirected to any MCA Lender.
• Despite adequate notice of the cases, certain MCA Lenders have continued their sweeps and tenant outreach. Each sweep erodes the DAMIS Debtors’ liquidity and threatens ordinary-course operations, while each rent-redirection attempt sows confusion among the tenant base—diverting significant time and resources toward coordinating with banks and tenants instead of administering the cases.
• Contemporaneously with the Declaration, the DAMIS Debtors filed a motion to restate and enforce the automatic stay, and they intend to pursue all available remedies—including orders compelling the return of improperly swept funds and the imposition of sanctions—to halt further unilateral collection efforts.

Preservation of Vendor Relationships

• The DAMIS Debtors rely on numerous vendors, suppliers, and service providers for goods and services including food, supplies, maintenance, staffing, and logistics. Since the Petition Date, many vendors have raised concerns about payment for prepetition services, and certain parties have signaled they may stop performing absent prompt payment.
  • Because any disruption in critical goods and services would carry severe economic and operational consequences, preserving vendor relationships ranks among the DAMIS Debtors’ highest priorities—addressed through their motion seeking authority to pay certain prepetition claims of critical vendors and service providers.

Long-Term Chapter 11 Objectives

• As the cases progress, the DAMIS Debtors intend to build stakeholder support for one or more value-maximizing transactions. Given minimal cash on hand, they will likely require additional liquidity to administer the cases effectively:
  • The DAMIS Debtors hope to negotiate the consensual use of cash collateral with some or all of the Mortgage Lenders holding security interests in rental income, hotel and resort revenues, and other proceeds generated by the Assets.
  • In parallel, the Debtor Advisors intend to explore all available options to meet liquidity needs, including debtor-in-possession financing, potential sales of Assets that retain equity value, and other transactions.