Case Summary: MOM Investcos Chapter 11

Business Description

Headquartered in Newport Beach, CA, the MOM Investcos⁽¹⁾ own and manage a substantial real estate portfolio across Southern California through a network of 60 special purpose entities (SPEs)⁽²⁾.

• Each MOM Investco entity holds multiple subsidiary SPEs, each tied to a distinct investment property.

The portfolio spans diverse asset classes, including hotels, residential and commercial buildings, and upscale vacation rentals. As of the Petition Date, the properties held by the Debtor SPEs have an estimated undistressed value of approximately $382 million⁽³⁾.

The MOM Investcos filed for Chapter 11 protection on Feb. 28 in the U.S. Bankruptcy Court for the District of Delaware, with additional Debtors joining on Mar. 10. As of the Petition Date, the Debtors reported $100 million to $500 million in both assets and liabilities.

⁽¹⁾ MOM CA Investco LLC (“MOM CA”), MOM AS Investco LLC (“MOM AS”), and MOM BS Investco LLC (“MOM BS”).

⁽²⁾ Nineteen of the SPEs (the “Debtor SPEs,” and together with the MOM Investcos, the “Debtors”) are part of the Chapter 11 cases. The inclusion of certain SPEs within the broader enterprise remains disputed. For a complete list of Debtor entities, see the Chapter 11 Debtors table below.

⁽³⁾ The valuation is based on prior appraisals, which the Debtors’ advisors have not yet verified.

Corporate History

The MOM Investcos were established in June 2021 as a joint venture between Continuum Analytics, represented by Mahender Makhijani, and 4G Wireless, Inc., represented by Mohammad Honarkar.

Under Operating Agreements finalized around June 8, 2021:

• Honarkar and 4G Wireless contributed their portfolio of SPEs to the MOM Investcos.
• Investor groups affiliated with Continuum Analytics initially pledged $35 million (later adjusted to $30 million) for the associated property projects, but later proceedings brought concerns about the fulfillment of these commitments (detailed below).

Each MOM Investco is jointly owned by Honarkar and dedicated Investor Groups (MOM CA Investor Group LLC, MOM AS Investor Group LLC, and MOM BS Investor Group LLC). These Investor Groups, housing individual investors, are directly or indirectly controlled by Makhijani and managed through affiliated MOM Managers.

Organizational Chart

Chapter 11 Debtors

Operations Overview

The MOM Investcos manage an extensive real estate portfolio primarily located in Laguna Beach, Southern California. The 60 SPEs include hotels, apartment complexes, office buildings, and individual homes used as luxury vacation rentals.

Financial Operations

• Historically centralized financial operations via primary bank accounts at Nano Banc and Enterprise Bank & Trust.
• Revenues from performing SPEs (tenant rents and online booking income) are first upstreamed to the MOM Investcos to fund specific operating expenses, such as payroll, and subsequently downstreamed back to the SPEs.

Management Structure

• Day-to-day operations of individual SPEs are delegated to specialized property management companies:
  • VGruppe: Manages residential and commercial properties.
  • Everyday Luxury: Oversees hotel operations.
• Both firms now operate under the direct oversight of a court-appointed management team rather than the former principals.

Prepetition Obligations

Property Level Secured Obligations Table (Footnote 1)

Top Unsecured Claims

Events Leading to Bankruptcy

Arbitration Dispute and Financial Distress

• The Debtors became embroiled in contentious arbitration proceedings initiated in October 2023 by Mohammad Honarkar and 4G Wireless (collectively, the “Arbitration Plaintiffs”) against Mahender Makhijani, Continuum Analytics, the Investor Groups, MOM Managers, and Nano Banc (collectively, the “Arbitration Defendants”). The Arbitration centered around allegations of fraudulent inducement, mismanagement, unauthorized transactions, and improper seizure of Debtor assets.
• Following evidentiary hearings, the Arbitration resulted in a partial interim award (the "Arbitration Award") issued on February 21, 2025. Key findings in the Arbitration Award included:
  • A $20 million Nano Banc loan was improperly secured by assets previously owned by the Arbitration Plaintiffs without their informed consent.
  • The Arbitration Defendants failed to make required initial contributions under Operating Agreements and conducted unauthorized financial transactions.
  • Forcible entry and seizure of the Arbitration Plaintiffs' 4G offices occurred, with proceeds from unauthorized asset sales diverted to the Arbitration Defendants.
• The Arbitration Award granted compensatory damages, restitution, punitive damages, and attorneys’ fees to the Arbitration Plaintiffs, while acknowledging potential compensatory damages recoverable by the Debtors as derivative claimants. A final Arbitration Award, including a detailed accounting, is expected following further proceedings.

Operational and Financial Distress

• The Debtors subsequently faced severe liquidity issues exacerbated by loan defaults, approximately $3.3 million in delinquent property taxes, and imminent foreclosure actions, including Notices of Default and Trustee Sales.
• The ongoing partnership dispute compounded financial distress, creating uncertainty over property ownership and hindering efforts to refinance assets and secure liquidity.
• Amid escalating creditor actions, trustee sale notices, and severe liquidity challenges, The MOM Investcos filed for Chapter 11 protection on February 28, 2025, with the remaining SPE Debtors following suit on March 10, 2025.

Governance and Management Reforms

• To address Arbitration-driven governance issues:
  • Robbin Itkin was appointed Independent Manager, while Mark Shinderman took on the role of Chief Restructuring Officer (CRO).
  • The Independent Manager assumed full managerial control on March 4, 2025, completely replacing prior management.
  • Immediate asset evaluations, financial transaction investigations, and engagement of FTI as restructuring advisor commenced.

Cash Collateral and DIP Financing

• The Debtors seek court authority to utilize cash collateral to maintain operational stability and protect estate value. Initial negotiations for interim cash collateral usage have begun with secured lenders, though detailed budgets and further creditor negotiations continue.
  • Enterprise Bank, a major secured lender, has raised objections regarding administrative budgets, citing dilution of collateral without adequate protection.
• The Debtors are also exploring DIP financing to fund operations through the reorganization.

Strategic Initiatives and Path Forward

• The CRO and Independent Manager are developing a comprehensive restructuring strategy, potentially including asset sales or strategic property development to maximize portfolio value. Ongoing investigations focus on potential claims related to diverted funds and unauthorized prepetition transactions involving arbitration parties.
• A reorganization plan is anticipated, aiming to manage remaining assets, resolve claims, maximize creditor recoveries, and potentially facilitate resolution of the arbitration dispute.

Initial Budget

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