Tzadik Apartments File Bankruptcies

A South Florida apartment mogul’s ambitious bet on South Dakota has turned into a disaster.

Adam Hendry’s Tzadik Management put its massive South Dakota multifamily portfolio into bankruptcy protection.

Tzadik’s crash is yet another example of a multi-family investor who went on a wild spree of apartment buying fueled with agency loans from Fannie Mae or Freddie Mac, only to be hit with rising interest rates and a trail of defaults and tenant complaints.

Based out of Hollywood, Florida, Hendry’s Tzadik took an unusual strategy of buying low-income apartments across the Dakotas, including 18 apartment properties in Sioux Falls, South Dakota, for over $50 million in 2018, according to the local newspaper Argus Leader.

Hendry described Sioux Falls as a “hidden gem” and one of the few areas in the U.S. where “housing values aren’t overheated” in an interview with the newspaper in 2018. He also claimed to have managed more than $1 billion in apartment communities and 19,000 units in more than 20 states.

But cracks began to show in 2021 when Tzadik alleged its former lender Arbor Realty helped put Tzadik on Fannie Mae’s blacklist, cutting off crucial agency financing. (Arbor denied the allegations in the lawsuit.)

Things only got worse in 2024 when a co-founder of Tzadik, Alex Arguelles, sued Hendry for $8 million, alleging Hendry cut him out of millions of dollars in property deals. In late 2024, a Miami-Dade County judge issued a $10.6 million award in Arguelles’ favor.

Meanwhile, tenants’ groups called out Tzadik in the press, claiming the firm’s management led to horrendous living conditions, including garbage and sewer issues, cockroaches, mold and even drug dealers hanging around the properties, according to local media.

Beginning in April, Tzadik began bankruptcy proceedings for, as of now, seven of Tzadik’s entities. In one filing, a Tzadik affiliate cited its bankruptcy as the result of “cash flow issues largely related to judgment collection, creditor activity, and other market conditions.”

“We are restructuring the portfolio via offers at and above appraised values on the properties, the lenders approved interim use of cash collateral,” said attorney Brett Lieberman of Edelboim Lieberman, who is handling Tzadik’s bankruptcies in a statement.

Notably, Tzadik’s two largest creditors are Merchants Bank and Fannie Mae. Tzadik owes $47 million to Fannie Mae, the government-sponsored agency that took on a loan originated by Greystone in 2020.

Merchants Bank also claims it is owed $57.8 million and alleges Tzadik stopped paying interest on its loan in mid-2024, according to court documents.

Merchants further alleges Tzadik has not paid taxes on certain properties and was forced to write a check for $411,000 to Tennington County, Minnehaha County and Lincoln County, South Dakota.

Merchants Bank is based in Indiana and is a major apartment lender. Some of its borrowers have found themselves in worse trouble than Hendry and are likely familiar names to The Real Deal readers.

The bank provided a loan to Moshe Silber’s Rhodium Capital for the Mon View Heights apartments outside of Pittsburgh. Silber was sentenced to 30 months for a mortgage fraud scheme. He is also being charged by the District Attorney of Allegheny County in Pennsylvania for the alleged “unlawful taking, receiving stolen property, dealing in the proceeds of illegal activity and criminal conspiracy” related to the Mon View Heights apartments.

Tzadik has not been accused of any criminal wrongdoing like other borrowers that Fannie Mae put on its blacklist, such as Silber.

But Fannie Mae is concerned about Tzadik’s use of cash to pay from properties to fund operations during bankruptcy. Fannie Mae also said the properties cannot be successfully operated by Hendry, claiming that properties specifically owned and controlled by him have “had receivership motions filed against them and have been so poorly maintained the properties that their disrepair has become a regularly reported topic in the local media.”

Fannie Mae, in a recent filing, warned the court that the debtor could be “using cash collateral to operate the mortgaged property without court authorization or lender consent or the debtor has starved the mortgaged property of needed operating cash to the possible detriment of both the residents and Fannie Mae’s collateral.”