RAD Diversified REIT - Chapter 11 Case Summary

RAD Diversified REIT filed for Chapter 11 bankruptcy following SEC regulatory action that halted the company's ability to raise new funds, allegations of investor fraud labeled as a potential Ponzi scheme by Florida's Attorney General, and operational distress marked by low occupancy rates and mounting foreclosures, seeking to preserve and maximize value across more than 300 residential properties under newly appointed independent management.

Business Description

RAD Diversified OZ Fund, LP ("RAD OZ"), RAD Diversified REIT, Inc. ("RADREIT"), DHI Fund, LLC ("DHI Fund"), DHI Holdings, LP ("DHI Holdings"), and DDH Fund, LLC ("DDH Fund") (collectively, the "Debtors") were formed to acquire, manage, renovate or reposition, and operate real property, consisting primarily of single family residential properties and vacant lots.

The Debtors own more than 300 residential rental properties and vacant residential lots located predominantly in Pennsylvania, Texas, and Florida, with additional properties in New Jersey.

RAD OZ is a Delaware limited partnership formed to invest in real property located in Qualified Opportunity Zones. RADREIT is a Maryland corporation formed to qualify as a real estate investment trust under the Internal Revenue Code. DHI Fund and DDH Fund are Delaware limited liability companies, and DHI Holdings is a Delaware limited partnership.

The purpose of these Chapter 11 Cases is to preserve and maximize the value of the Debtors' substantial real estate assets for the benefit of creditors and equity investors.

Certain affiliates of the Debtors that own real estate other than residential real properties have not filed bankruptcy at this time.

Corporate History

Brandon Dutch Mendenhall and Amy Vaughn are the founders of each of the Debtors and are believed to have exercised managerial control over each of the Debtors since they were founded.

Appointment of Independent Management

In light of regulatory matters and consequent financial distress, as well as imminent foreclosure sales scheduled for many of the Debtors' properties, the Debtors determined that engaging an independent manager to govern their operations was appropriate.

On February 20, 2026, each of the Debtors formally engaged GGG Partners to provide turnaround management services, designating Katie S. Goodman as Chief Restructuring Officer ("CRO").
On February 28, 2026, the Debtors each executed Independent Director Agreements under which each of the respective Debtors delegated all managerial authority over its operations and management to the Independent Director, Michael T. Roye.
On March 1, 2026, the Independent Director authorized the CRO to file voluntary Chapter 11 petitions for each of the Debtors.

The bankruptcy cases were filed on an emergency basis on March 1, 2026, in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division, to prevent additional loss of properties through foreclosure and trustee sales.

Operations Overview

The Debtors operate a portfolio of residential rental properties and vacant lots across multiple states. Based on the CRO's understanding, tenants of the Debtors' properties pay rent through AppFolio, a property management software, which is transferred by ACH into RADREIT's pre-petition bank account.

The CRO is advised that the Debtors received total rental income in excess of $90,000 in each of December 2025 and January 2026.
Based upon the Debtors' pre-petition rent roll, the Debtors anticipate collecting rents on the occupied residential rental properties in the aggregate amount of at least $90,000 per month during each of the first two months of these cases.

Cash Management

Each of the Debtors maintained one or more pre-petition bank accounts. The Debtors are in the process of setting up debtor-in-possession bank accounts at an approved depository institution, with GGG personnel as the sole signatories on the debtor-in-possession accounts.

It will take approximately 30 days from the date a request is made for AppFolio to change the ACH transfer from RADREIT's pre-petition bank account to the debtor-in-possession bank accounts.

In order to protect the personal information of the Debtors' tenants, the Debtors will be seeking to file their respective Schedules of Executory Contracts under seal and limit access to this schedule to the Court and the US Trustee.

Prepetition Obligations

Historically, the Debtors funded their operations with a combination of cash flow from rentals, property sales, loans, and investments. However, as of the Petition Date, many of the Debtors' properties are vacant, and the CRO is advised that many tenants are withholding payment of rent because they have been served with foreclosure lawsuits. Accordingly, the Debtors are not receiving substantial rental income.

Property Level Secured Obligations

It has been represented to the CRO that most of the real properties owned by the Debtors are subject to deeds of trust, mortgages, and other secured debt (collectively, the "Mortgages") in favor of various lenders (collectively, the "Real Estate Lenders") arising from the acquisition, development, and/or ownership of such real property.

Because many of the Mortgages have been assigned (in some cases multiple times), the property exhibit provided by management may not reflect the current owner of the Mortgage or the current servicer of that mortgage. The Debtors' proposed counsel is reviewing title reports for each property to determine the current holder and servicer of all mortgages and other recorded liens.
The Mortgages provide the various Mortgagees with a lien on rents.
Based upon review of title searches and UCC searches, the majority of the properties owned by the Debtors are encumbered by first mortgages or deeds of trust, judgment liens, ad valorem tax liens, and/or municipal liens, but certain properties may be owned free and clear of any liens.

It has been represented to the CRO by pre-petition management that certain of the properties have equity in their current condition, and others will require minor repairs and maintenance to return the properties to a rentable condition and maximize the value of these properties. The CRO and her advisors have not yet had an opportunity to analyze value, liens, and condition of each of the properties.

Capital Raising Efforts from Individual Investors

It has been represented to the CRO that the Debtors engaged in a variety of prepetition fundraising efforts, including public offerings under Reg A and Reg D, and that there are more than 5,000 investors, the majority of which are individuals, closely held businesses, or self-directed IRAs.

Certain of the investments were documented and denominated as secured promissory notes, unsecured promissory notes, joint ventures, and equity investments.
The investors were initially "assigned" to a particular Debtor entity or property, and in some cases were "rolled over" into a different Debtor or non-debtor entity or property.
In most cases, the "joint venture" investors are not reflected on the deed or elsewhere in the official records.
Similarly, the "secured promissory notes" indicate that the note is secured by the real property located at a specified address, but there is no mortgage or other document recorded in the official records that reflects the existence of a lien.

The Debtors have at least 5,000 investors, who have made aggregate investments in one or more of the Debtors ranging from $1,000.00 to more than $1,000,000.00. Pre-petition, the Debtors communicated with these investors primarily through email.

Events Leading to Bankruptcy

Regulatory Matters and Negative Publicity

In the years leading to the Petition Date, the Debtors' ability to obtain financing and capital from investors was crippled by the negative publicity attendant to certain governmental, compliance, and regulatory matters (collectively, the "Regulatory Matters").

In February 2024, the United States Securities and Exchange Commission halted RADREIT's ability to raise new funds by declaring its offering statement abandoned.
Subsequently, in July 2025, Florida Attorney General James Uthmeier announced he had issued subpoenas to RADREIT and related entities after receiving alleged investor complaints that RADREIT wasn't using investor money as represented.
- In a public statement, Uthmeier said "this appears to be a Ponzi scheme."
- While the Debtors' pre-petition management strenuously disagrees with this characterization, the accusation received substantial press coverage and crippled the Debtors' ability to operate their businesses.

Litigation and Eviction Action

The Debtors have also been the subject of some private litigation by investors, including a civil RICO suit in which a well-known media personality asserts that certain affiliates of the Debtors allegedly misled investors.

Additionally, the landlord of RADREIT's former principal place of business, 100 S Ashley Drive, Suite 700, Tampa, Florida, filed an eviction action against the Debtor in May 2025 that also received substantial publicity.

As a result of the publicity from the Regulatory Matters, the pending litigation, and resulting loss of investor trust, the Debtors determined that the implementation of independent management safeguards and seeking Chapter 11 protections was necessary to maintain the value of the Debtors' assets for the benefit of all parties in interest.

Operational and Financial Distress

The negative press that resulted from certain Regulatory Matters crippled the Debtors' ability to obtain financing and raise the capital necessary to continue to operate its business.

In addition to the legal fees associated with the Regulatory Matters, low occupancy rates, high overhead, stagnant real estate markets, and high mortgage interest rates resulted in significant negative cash flow to the Debtors.
Over time, the Debtors began defaulting on Mortgages and Deeds of Trust and failing to timely pay real estate taxes and insurance.
As of the Petition Date, the Debtors have lost a number of properties through foreclosure or deeds of trust sales, and dozens of additional foreclosures and related actions are pending.

The filing of the Chapter 11 Cases was necessary to avoid further diminution of the value of the Debtors' Estates.

The Debtors and their advisors have developed three primary objectives for these Chapter 11 Cases:

Independent Management: The CRO and Independent Director have taken control of the estates to preserve and maximize value for the benefit of all constituents, independent of pre-petition management.
Assessment and Sale Process: The Debtors intend to develop a comprehensive plan to maximize the value of their real estate holdings, involving a sale of some properties and the creation of a post-confirmation trust to manage and liquidate the remaining properties for the benefit of investors and other parties in interest.
Plan of Reorganization: The Debtors intend to pursue confirmation of a plan of reorganization involving one or more trusts to which the real property and all claims and causes of action will be transferred.

The Debtors have also engaged Soneet Kapila and KapilaMukamal, LLP to provide forensic accounting services, including an investigation of transactions among the Debtors, non-debtor affiliates, and investors, as well as the sources and uses of investor funds. The CRO has additionally instructed advisors to investigate potential claims the Debtors may have against third parties and to evaluate all pre-petition transfers of estate property.