Nied Ownership LLC, a Central Florida real estate holding company with no employees and no operations of its own, faces a motion to dismiss its Chapter 11 case filed by ACRE CFPortfolio LLC, the debtor's sole secured creditor. The motion contends that the May 1, 2026 bankruptcy petition was filed in bad faith to obstruct a scheduled UCC Article 9 foreclosure sale of the debtor's principal asset. ACRE filed the motion on May 12, 2026 in the United States Bankruptcy Court for the Middle District of Florida, Orlando Division, Case No. 6:26-bk-03232-TPG (Docket No. 23).

The motion seeks three forms of relief. ACRE first asks the court to dismiss the case for cause under Section 1112(b)(1) on grounds of bad faith. In the alternative, it asks for dismissal under Section 1112(b)(4)(A) based on substantial or continuing loss to the estate and the absence of any reasonable likelihood of rehabilitation. As a further alternative, ACRE seeks relief from the automatic stay under Sections 362(d)(1) and 362(d)(2) to resume the foreclosure sale of the debtor's pledged equity interests in non-debtor affiliate Nied Member, LLC.

Nied Ownership LLC is a Delaware limited liability company with its principal address in Apopka, Florida. The debtor has no employees and conducts no independent business operations. Its principal asset is a 100% ownership interest in the common equity of Nied Member, LLC, which in turn indirectly owns a portfolio of twelve residential properties located throughout Central Florida. The portfolio comprises vacant land, a senior and independent living facility, student housing, and Class A multifamily apartment properties. The debtor also holds majority and minority ownership interests in several affiliated entities, including 60.12% of NDALD, LLC, 100% of NJALD, LLC, and 100% of MRAD Phase III, LLC, each holding additional real estate assets in the Central Florida region.

ACRE CFPortfolio LLC holds 100% of the preferred equity interests in Nied Member. Pursuant to a Pledge and Security Agreement dated March 1, 2023, the debtor pledged its common membership interests in Nied Member to ACRE as collateral securing its obligations as common member under the related operating agreement. The pledge agreement was originally entered into with ACRE's predecessor-in-interest, PCRED II Holding XVIII LLC. As of the May 1, 2026 petition date, the secured obligations owed to ACRE total no less than $89 million, comprising the $50 million original preferred equity investment, unpaid mandatory distributions, and $30 million in protective advances recently made by ACRE directly to a mortgage lender on behalf of the portfolio.

Composition of the ACRE Secured Claim

The twelve Central Florida properties indirectly held through Nied Member carry more than $457 million in mortgage debt across ten active loans held by multiple lenders. As of the petition date, seven of those ten loans were in default, including three on which mortgage lenders had already commenced formal foreclosure proceedings. The remaining three loans, currently listed as "Current," carry May 31, 2026 maturity dates and were expected to fall into default by month-end. The portfolio's exhibit-level disclosures report a weighted-average occupancy rate of approximately 74%, well below the market level of approximately 90% cited in the motion.

The motion further asserts that material accounts payable, taxes, liens, and other vendor obligations remain unpaid across the portfolio. The debtor and Nied Member failed to redeem ACRE's preferred equity interests when that obligation first became due on July 29, 2025, and have remained in default since. ACRE estimates the portfolio requires approximately $43 million in additional capital to meet capital expenditure needs and support ongoing operations, on top of the $457 million required to address existing and imminent mortgage loan defaults. Combined, ACRE estimates approximately $500 million in total fresh capital is needed to address all defaults and operational needs.

Property and Loan Schedule (Exhibit 2 to the Motion)

In the months preceding the bankruptcy filing, ACRE undertook efforts to stabilize the portfolio and engage the debtor in restructuring discussions. In March 2026, ACRE circulated a pre-negotiation letter, which the debtor's principals declined to sign or comment upon. In April 2026, ACRE provided a restructuring term sheet outlining a potential path forward, which the motion states produced no engagement from the debtor or its principals.

On April 24, 2026, ACRE made approximately $30 million in protective advances to prevent immediate enforcement actions by structurally senior mortgage lenders. The advances were made through forbearance arrangements covering loans on three portfolio properties: Aston Park, The Nolen at 949 Cleveland Street, and The Tiffany at Maitland West. The advances extended the maturity dates on those loans through July 31, 2026 and secured a waiver of default interest and late charges. According to the motion, the underlying loans remained in default notwithstanding the forbearance.

Concurrent with its stabilization efforts, ACRE moved to exercise its contractual and state-law remedies. On March 5, 2026, ACRE noticed a UCC Article 9 foreclosure sale of its collateral, the debtor's pledged equity interests in Nied Member, and engaged a subsidiary of Jones Lang LaSalle Americas, Inc. to conduct a commercially reasonable marketing process. The public auction was scheduled for May 8, 2026, providing more than two months for market exposure, due diligence access, and an opportunity for the debtor to raise objections or propose a consensual alternative. JLL conducted outreach to more than 8,000 potential bidders, made diligence materials available through an online data room, and placed advertisements in The Wall Street Journal, Commercial Mortgage Alert, and the Orlando Sentinel.

The Marketing Funnel

The motion states that as of the petition date, no third party had submitted a deposit, executed a purchase agreement or accredited investor certificate, registered to attend the auction, or inquired about the form of purchase agreement. ACRE was the sole qualified bidder, in its capacity as the secured party entitled to credit bid. Supporting these facts is the Declaration of Brett Rosenberg, filed alongside the motion, which provides detailed disclosure of the marketing process and bidder engagement.

On May 1, 2026, two business days before the deadline for third parties to qualify as bidders and one week before the scheduled May 8 public auction, the debtor filed its Chapter 11 petition. On that same day, without notifying ACRE of the bankruptcy filing itself, the debtor sent ACRE a letter objecting to the foreclosure sale and demanding its cancellation, requiring a response within three calendar days over a weekend. ACRE responded by the stated deadline but received no further reply from the debtor. The debtor's own case management summary, filed as Docket No. 14, states that the Chapter 11 case was commenced to "maintain the possibility of a consensual resolution."

ACRE's bad-faith argument is grounded in the six-factor framework established by the Eleventh Circuit in Phoenix Piccadilly, Ltd. v. Life Ins. Co. of Va. (In re Phoenix Piccadilly, Ltd.), 849 F.2d 1393 (11th Cir. 1988) and reaffirmed in In re State St. Houses, Inc., 356 F.3d 1345 (11th Cir. 2004). The Eleventh Circuit has separately confirmed in Piazza v. Nueterra Healthcare Physical Therapy, LLC (In re Piazza), 719 F.3d 1253 (11th Cir. 2014) that bad faith constitutes "cause" for dismissal under Section 1112(b)(1). Not all factors must be present for a finding of bad faith, but ACRE argues all six are present here.

ACRE relies on additional case law supporting application of the factors here, including In re Serfass, 325 B.R. 901 (Bankr. M.D. Fla. 2005), In re Brandywine Assocs., 85 B.R. 626 (Bankr. M.D. Fla. 1988), and In re PM Cross, LLC, 494 B.R. 607 (Bankr. D.N.H. 2013).

If the court declines to dismiss the case, ACRE seeks relief from the automatic stay on three independent grounds. Each goes to a separate aspect of the secured creditor's position.

Section 362(d)(1): Cause Based on Bad Faith

The Eleventh Circuit recognizes that the same conduct that supports dismissal for bad faith under Section 1112(b)(1) also supports stay relief for cause under Section 362(d)(1). See In re Phoenix Piccadilly, Ltd., 849 F.2d at 1394; Barclays-American/Bus. Credit, Inc. v. Radio WBHP, Inc. (In re Dixie Broadcasting), 871 F.2d 1023 (11th Cir. 1989).

Section 362(d)(1): Lack of Adequate Protection

ACRE argues its collateral is not adequately protected because the portfolio's value continues to decline through ongoing property-level foreclosures, deteriorating occupancy, and operational mismanagement. The non-debtor Property Owners did not seek bankruptcy protection, and their mortgage lenders remain free to exercise remedies unaffected by the debtor's automatic stay. ACRE cites United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assocs., 484 U.S. 365 (1988), and analogizes to In re JER/Jameson Mezz Borrower II, LLC, 461 B.R. 293 (Bankr. D. Del. 2011), where a mezzanine lender was found not adequately protected when senior lenders at the operating-company level were exercising remedies.

Section 362(d)(2): No Equity and Not Necessary to Reorganization

ACRE argues the debtor holds no equity in its pledged interests given the $89 million lien, and that the collateral is not necessary to any effective reorganization. The JLL marketing process, ACRE contends, supplies market evidence that the collateral value does not exceed the secured claim, citing the Supreme Court's recognition that exposure to a market is the best evidence of value in Bank of Am. Nat'l Tr. & Sav. Ass'n v. 203 N. LaSalle St. P'ship, 526 U.S. 434 (1999), along with In re Virgin Orbit, LLC, 659 B.R. 36 (Bankr. D. Del. 2024) and In re Airwalk Int'l, LLC, 305 B.R. 34 (Bankr. D. Colo. 2003).

ACRE further argues the debtor cannot satisfy the cramdown requirements of Section 1129(a)(10) because no legitimate non-insider impaired accepting class of unsecured creditors exists. At most, the Chapter 11 case would result in a sale, which the motion characterizes as the same outcome the foreclosure process was already pursuing without the delay and expense of bankruptcy.

The motion identifies a prepetition transfer of real property that ACRE characterizes as fraudulent. In December 2025, a parcel within the portfolio was transferred by Special Warranty Deed to affiliated entity MRAD Phase III, LLC for consideration of $10.00. The deed was executed December 28, 2025 and recorded in Orange County, Florida on March 5, 2026. The transferred parcel was part of a property supporting a $44 million mortgage loan (the Vale East property, held by RRAD Phase I, LLC). ACRE asserts the transfer was made in willful violation of the operating agreement, which prohibits property sales or transfers to affiliates without the prior written approval of the preferred investor.

Separately, certain principals affiliated with the debtor are named as defendants in litigation pending in the Court of Common Pleas, Cuyahoga County, Ohio (Lance Polen v. David Niederst, et al., Case No. CV-24-100462). That lawsuit, filed in 2024 and amended in December 2025, alleges fraud, breach of fiduciary duty, civil conspiracy, and related claims arising from unrelated Ohio business ventures, with damages sought in excess of $25 million. The amended complaint also names several of the same Central Florida apartment development entities as defendants and asserts lis pendens claims against certain Florida properties in the portfolio. The Ohio pleadings are attached to ACRE's motion as Exhibit 12.