ZOM Living - Chapter 11 Case Summary

ZOM Holding, Inc., which does business as ZOM Living, and two subsidiaries filed Chapter 11 after a $308.6 million Arizona state-court judgment in favor of Gray Services and Gray Development over a non-circumvention agreement. ZOM Holding is appealing the judgment, and Gray is seeking to enforce it in Florida. The Debtors plan a court-supervised sale of substantially all of their assets, with ZOM Holding, LP, ZOM Holding, Inc.’s prepetition secured lender, as the expected stalking horse bidder and proposed provider of a DIP facility of up to approximately $6.5 million.

Business Description

Headquartered in Winter Springs, Florida, ZOM Holding, Inc. ("ZHI"), together with its Debtor subsidiaries ZOM Associates, Inc. ("ZAS") and ZH Development I, LLC ("ZH Dev," and collectively with ZHI and ZAS, the "Debtors"), is part of an organization that specializes in the construction and management of multifamily and senior living communities. The Debtors operate under the "ZOM" and "ZOM Living" names, and ZHI is a subsidiary of non-Debtor FLOR Holding USA, Inc.

From inception, the Debtors' business model was to develop real estate projects alongside a lender and an equity investor, retaining a small interest in each project and acting as its developer; completed projects were generally sold to a third party. Since 2017, new development projects have been held by a separate non-Debtor holding company, ZOM Holding, LP ("ZHLP"), for which the Debtors provide management services.

The Debtors filed Chapter 11 in the Middle District of Florida on October 30, 2026 (the "Petition Date") and are pursuing a sale of substantially all of their assets while ZHI appeals a $308.6 million Arizona state-court judgment.

Corporate History

Formation and Ownership

ZHI was formed in Florida and has traditionally served as the holding company for the real estate development business. ZAS was formed in Florida in 2009 as an employment company supporting the business, and ZH Dev was formed in Delaware in 2011 as one of its developer entities. FLOR Holding USA, Inc. owns 100% of ZHI, which in turn owns 100% of ZAS (as sole shareholder) and ZH Dev (as member and manager). ZOM Partners, LP holds a variable profits interest in ZH Dev that changes based on certain employment contracts, but has no control or authority over ZH Dev.

2017 Tax Restructuring and ZHLP

In 2016, certain of ZHI's direct and indirect equity holders began exploring a restructuring of the business to create a more efficient tax structure for new development projects. ZHLP was formed in Florida in 2017 as the holding company for those projects. ZHI and ZHLP share some, but not all, indirect equity holders and do not share a common parent entity. ZHLP also acquired ZHI's investments in four development partnerships, along with ZHI's preacquisition costs, for (a) a $5 million upfront cash payment from ZHI to ZHLP, (b) a $16 million unsecured loan in favor of ZHI, which ZHLP repaid in full by the end of 2021, and (c) future obligations under the partnership investments and all risk of loss associated with the preacquisition costs.

Board and Management

In January 2026, ZHI's former directors resigned and Colin Adams and Anna Phillips were appointed as its sole directors. The Declaration describes both as independent directors with restructuring credentials who were not associated with ZHI before their appointment. Neil Luria, Co-Head of the restructuring and financial advisory practice at GBH SOLIC Holdco, LLC ("SOLIC"), has served as Chief Restructuring Officer ("CRO") of ZHI since January 27, 2026, and of ZAS and ZH Dev since October 16, 2026. The Debtors engaged SOLIC to provide his services and support staff after interviewing multiple candidates. The CRO has control over the Debtors and is authorized by ZHI's directors to make all decisions and take all actions related to the Chapter 11 cases. The rest of the leadership team consists of Greg West (Chief Executive Officer), Jonathan Young (Chief Financial Officer) and Matthew Adler (Chief Investment Officer).

Operations Overview

Since the tax restructuring began, the Debtors have continued to operate and to earn development and construction management fees. ZHI has two remaining projects, MetWest in Tampa, Florida and Hazel & Azure in Arlington, Virginia, on which it may receive development fees if certain incentives are met.

Services to ZHLP and Stonebridge

Under a Management Services Agreement, ZHI and ZAS provide ZHLP with (a) employees and day-to-day services, including accounting, information technology and other administrative functions, and (b) the right to use the "ZOM," "ZOM Living" and "ZOM Senior Living" names, which are covered by multiple federal trademarks held by ZHI. ZHLP pays the Debtors fees for these services. Some of the Debtors' employees also perform services for non-Debtor Stonebridge REIM Inc. ("Stonebridge"), which reimburses the Debtors for payroll and pays an accounting management fee.

Workforce, Offices and Assets

As of the Petition Date, the Debtors had 31 employees, some of whom perform the ZHLP and Stonebridge services. In addition to the Winter Springs headquarters, the Debtors have offices or share office space in Arizona, Texas, North Carolina and Massachusetts. Their assets consist primarily of the workforce, trademarks, insurance policies, office equipment, décor, furniture, development interests and causes of action.

Prepetition Obligations

As of the Petition Date, ZHI's line of credit from ZHLP (the "ZHLP Loan Facility"), with a principal balance of approximately $3.8 million, was the Debtors' only material secured debt. The Debtors estimate total unsecured claims at approximately $541 million. Their unsecured debt consists of a final Arizona state-court judgment against ZHI in favor of Gray Services, LLC and Gray Development LLC (together, the "Gray Plaintiffs," and the judgment, the "Gray Judgment"), hundreds of millions of dollars of guaranty and bond indemnity obligations related to ongoing projects, and payables to vendors. Other than employee wages and benefits addressed in a first-day motion, the Debtors have no known unpaid tax liabilities and no known, liquidated priority claims.

ZHLP Loan Facility

The ZHLP Loan Facility originated on February 4, 2026, with subsequent advances on March 12, May 7, May 28, June 25, July 31, September 10 and October 21. Amounts owed under the facility are secured by a security interest in all of ZHI's assets.

Gray Judgment

The Gray Judgment, a final judgment for $308,552,331.50 plus interest, was entered by the Maricopa County Superior Court on May 12, 2026 as to all claims and parties under Arizona Rule of Civil Procedure 54(c). It awards:

Guaranties and Bond Indemnities

In recent years, ZHI and ZHLP have served as co-guarantors on multiple commercial real estate projects. They remain co-guarantors on five projects located in Round Rock, Texas; Arlington, Virginia; Miami, Florida; and Cary, North Carolina. ZHI has also guaranteed performance on certain ZHLP loans. The Declaration states, on information and belief, that ZHLP or one of its subsidiaries is the sole guarantor, without ZHI, on multiple other projects that ZHLP continues to develop. According to the Declaration, ZHI has remained in good standing on its guaranty obligations.

Events Leading to Bankruptcy

The Declaration attributes the filing to a dispute with Bruce Gray and his entities (collectively, "Gray"). The dispute began in 2022, after ZT Property Acquisition, LLC ("ZT Property Acquisition"), a non-Debtor indirect subsidiary of ZHLP, bought four Arizona development parcels out of a bankruptcy case, and it led to the Gray Judgment against ZHI.

The Arizona Properties and the Non-Circumvention Agreement

In May 2019, Bruce Gray contacted ZHI about an opportunity to develop four parcels of vacant land in Phoenix and Scottsdale, Arizona (the "Arizona Properties"), one of them held under a lease from the Arizona State Land Department. The Arizona Properties were held by four single-purpose entities (the "Gray SPEs") and were encumbered by substantial debt. Their lender had already begun foreclosure proceedings before Gray approached ZHI. In connection with those discussions, ZHI executed a Mutual Confidentiality and Non-Circumvention Agreement (as amended, the "Non-Circumvention Agreement") with Gray Services, LLC. The agreement extended to each side's subsidiaries and affiliates. Under it, Gray provided ZHI with information that Gray deemed confidential or proprietary, and the parties agreed not to circumvent one another or initiate transactions that bypassed the other.

ZT Development Agreement and the Arizona Bankruptcy Sale

Later in 2019, the Gray SPEs entered into a purchase and sale agreement for the Arizona Properties with ZT Development, LP ("ZT Development"), another indirect subsidiary of ZHLP. ZT Development terminated the agreement in April 2020, a termination the Declaration characterizes as permitted under its terms. On April 21, 2020, the Gray SPEs filed Chapter 11 cases (the "Arizona Bankruptcy Cases") before the U.S. Bankruptcy Court for the District of Arizona (the "Arizona Bankruptcy Court"). Bruce Gray and the Gray Plaintiffs were not debtors but participated as creditors and parties in interest, and Mr. Gray also acted as a manager of the Gray SPEs. At the request of the properties' lender, the cases were converted to Chapter 7 on August 25, 2020.

In the Chapter 7 cases, ZT Property Acquisition submitted an $82 million stalking horse offer for all four properties, together with the estates' interest in a related state-court lawsuit against the Arizona State Land Department and the State of Arizona. No higher or better offer was presented. TIG Romspen US Master Mortgage, LP ("Romspen"), which held liens on all four properties, submitted a $70 million backup credit bid. On November 25, 2020, the Arizona Bankruptcy Court approved the sale to ZT Property Acquisition free and clear of all liens, claims and encumbrances (the "Arizona Bankruptcy Sale Order"). The order directed that recorded liens be paid in full from the proceeds at closing, including approximately $74.3 million owed to Romspen and approximately $1.6 million owed to ZT Development under a blanket deed of trust on all four properties. On the declarations and testimony of the Chapter 7 trustee and of Greg West, now the Debtors' Chief Executive Officer, on behalf of ZT Property Acquisition, the court found that the sale was conducted at arm's length and that ZT Property Acquisition was a good-faith purchaser under section 363(m). The Arizona Bankruptcy Cases were closed on October 1, 2021.

The Gray Litigation and the Clarification Order

In 2022, almost two years after entry of the Arizona Bankruptcy Sale Order, the Gray Plaintiffs sued ZHI in Maricopa County Superior Court (the "Gray Litigation"). They asserted breach of contract, unjust enrichment and breach of the implied duty of good faith and fair dealing, based on the Non-Circumvention Agreement and the sale of the Arizona Properties to ZT Property Acquisition. According to the Declaration, Gray made no demand on ZHI before filing suit. ZT Property Acquisition was not a party to the Gray Litigation.

ZT Property Acquisition then moved to reopen the Arizona Bankruptcy Cases and sought clarification of the Arizona Bankruptcy Sale Order, arguing that Gray was using the Gray Litigation to challenge or undermine it. At a January 7, 2025 hearing, Gray's counsel represented to the Arizona Bankruptcy Court that ZT Property Acquisition was not formed until after the Non-Circumvention Agreement was executed, and therefore was not bound by it, and that it was not a defendant in the state case. In the reopened cases, Gray also repeatedly stated that it did not dispute the validity of the sale or the sale order, and it distinguished ZT Property Acquisition's acquisition of the land and the right to develop it from the intellectual property rights to the projects Gray had planned for the parcels.

On September 12, 2025, the Arizona Bankruptcy Court ruled on motions brought by ZT Property Acquisition, ZT Development and ZHI. Its order (the "Arizona Bankruptcy Clarification Order"):

Trial, Judgment and Appeal

The Gray Litigation went to a twelve-day jury trial beginning September 16, 2025. On October 3, 2025, the jury found ZHI liable for breach of contract and breach of the implied duty of good faith and fair dealing and awarded each Gray Plaintiff $148.2 million. The court entered the Gray Judgment in May 2026. The Declaration characterizes the damages as profits Gray said it would have earned by developing the Arizona Properties, which Gray did not own. It also states that ZHI was neither the purchaser of the Arizona Properties nor part of the same organizational structure as the purchaser.

ZHI timely appealed to Division One of the Arizona Court of Appeals. ZHI filed its opening brief on September 30, 2026, and Gray’s brief is due on December 9, 2026. ZHI seeks outright reversal on two independent grounds: that Gray failed as a matter of law to prove lost-profit damages with reasonable certainty, and that Gray recovered profits from rights it never owned. ZHI also argues that four independent errors each require a new trial:

Settlement Efforts and Florida Enforcement

Beginning in May 2026, in parallel with the appeal, ZHI and ZHLP pursued a settlement with Gray. They produced thousands of pages of documents to Gray, held multiple informal settlement conferences among themselves and with Gray, and attended a full-day mediation with mediator Antonio Piazza on July 28, 2026. Negotiations continued for months after the mediation until the parties reached an impasse. Throughout, ZHI continued to discuss the situation with its lenders to avoid a default under its guaranties. On October 1, 2026, Gray recorded the Gray Judgment in Seminole County, Florida, seeking to domesticate and enforce it in Florida. According to the Declaration, enforcement outside the bankruptcy process would harm the Debtors' other creditors and employees and destroy any remaining value for creditors.

Investigation of Claims Against ZHLP

Following the CRO's appointment and in connection with the settlement negotiations, ZHI, through SOLIC, began investigating possible claims against ZHLP and potential insiders of the Debtors. The theories relate to repayment of certain transfers and to successor liability. SOLIC analyzed the Debtors' books and records for potentially avoidable transfers, including through employee interviews about the nature of those transfers and other potential claims between the companies. ZHI has made demand on ZHLP for these claims, and ZHLP contests them. The CRO has also considered possible claims against professionals involved in the Arizona Bankruptcy Cases and the Gray Litigation, and ZHI has executed tolling agreements covering some of those claims.

Chapter 11 Filing

After deliberation with ZHI's directors, the CRO determined to commence the Chapter 11 cases and sell the Debtors' operations and assets, including any claims and causes of action. The Debtors intend to keep day-to-day operations running while they pursue that sale and the appeal of the Gray Judgment. ZHI will separately move to lift the automatic stay so that it can continue the appeal in Arizona.

According to the Declaration, the filing will cause the Debtors to default under their guaranty obligations, which may be assumed through the court-supervised sale process. The Debtors cite the risk that, without a filing, employees would lose their jobs and asset values would deteriorate, including the value of the claims against ZHLP. The Declaration also states that a ZHI default on its guaranties of certain ZHLP loans would cross-default those loans and significantly reduce ZHLP's value.

ZHLP DIP Facility

The Debtors will seek authority to use cash collateral and to enter into a financing agreement with ZHLP, ZHI's prepetition secured lender under the ZHLP Loan Facility and the party against which ZHI has made demand on the contested transfer and successor-liability claims described above. The agreement would give the Debtors access to a new-money DIP loan facility of up to approximately $6.5 million to fund the Chapter 11 cases.

Stalking Horse Sale Process

As of the Petition Date, the Debtors were finalizing a stalking horse asset purchase agreement for substantially all of their assets with ZHLP, the proposed DIP lender, or its designee. The Debtors commenced the cases to close a sale either to that stalking horse bidder or to a third party that submits a higher or otherwise better bid. In the coming days, the Debtors expect to file a motion to approve a twelve-week, court-supervised bidding and sale process and to authorize entry into the stalking horse agreement. The process is keyed to milestones in the DIP facility. During the marketing period, the Debtors and their advisors will populate a data room, contact prospective acquirers, distribute teasers and confidential information memoranda, and give bidders an opportunity to conduct diligence.

First Day Motions