Hayworth IB v. Hayworth DST

Hayworth Tanglewood IB, LLC sued Hayworth Tanglewood, DST, the signatory trustee, and Hayworth Tanglewood LeaseCo. File & ServeXpress stamped the filing 30 Jun 2025 09:50PM EDT (Transaction ID 76552285), the same day the complaint says the bridge lender became the IB’s manager. Counsel Richards, Layton & Finger and King & Spalding. Allegations.

Complaint

DST formed 31 May 2022. Trust Agreement 29 Jun 2022 (Exhibit B; image-only). Bought 30 Jun 2022 for $105,500,000. IB capital contribution $58,959,026.60: bridge lender $50,089,148.27 plus EquityCo $8,869,878.33 (complaint fn 3). The PPM states the $50.09 million slice. Fn 3 also says the EquityCo slice cannot be returned until the bridge lender is fully repaid. The 15 Jan 2026 opinion recites “over $58 million.” The complaint defines the bridge lender as Knights Hill Ireland II DAC and KHCA Funding LLC. Signatory trustee and LeaseCo are wholly owned by Versity Invest (now Crew). Offering, lease, and PMA live on Hayworth.

The complaint alleges redemption was to happen incrementally over three to six months as interests sold. It alleges about $37.7 million of interests sold; about $20.1 million of allocated net proceeds paid to the bridge lender; about $17.6 million sold without a matching redemption, so the IB still holds no less than 60%. The theory is that selling interests to outsiders without redeeming the IB created more beneficial interests than the PPM contemplated. Alleged diversions of unsyndicated proceeds: at least $5 million to Apex South Creek; at least $2 million to Sunstone Development LLC (alleged common ownership with Versity Invest; the complaint notes a then-recent bankruptcy); acquisition fees paid before 100% of interests were sold (the PPM says those fees wait on full syndication). Property listed about 8 May 2025 at $88 million; Walker & Dunlop call for offers 27–29 May 2025; the complaint alleges at least three best-and-final offers as of filing.

Five counts: breach of the Trust Agreement; fiduciary duty (including alleged §7.03 prohibited actions — reinvesting Trust money except as §4.02 allows, and taking investor capital except as the PPM provides); implied covenant; and two declaratory counts (60% IB share; disposition fee under the side letter). The complaint also says Trust Agreement §11.08 is unenforceable to the extent it would bar a Delaware proceeding. Relief requested includes a constructive trust over the DST and an injunction against distributing sale proceeds. Allegations.

Verification of Joshua P. Eaton is a separate docket item (98906127) and is not in this PDF.

Exhibits

Exhibits A–D are the opening bundle. Exhibit A is the 7 Jul 2022 PPM: Maximum Offering Amount $76,767,365, matching Form D; WealthForge exclusive managing BD; first mortgage $48,000,000 from TC Debt Opportunities, LLC. The complaint later describes the offering as about $77.9 million. Exhibit C is the 30 Jun 2022 master lease. Exhibit D is the same-day LeaseCo side letter.

Stay

Molina denied a McWane stay pending KHCA on 15 Jan 2026. Defense counsel withdrawal granted.

Same leftover-IB pattern as Vintage IB.