By BEX Staff for AZBEX
The long-troubled $2B Ritz Carlton Paradise Valley resort is facing new problems as the financer and developer continue to square off.
The 122-acre project started construction in 2018, having first been announced in 2007, and was beset with challenges almost immediately. The resort’s initial 2024 opening date has been pushed back repeatedly amid various starts and stops.
In the latest round, Madison Realty Capital, which loaned $585M for the project in 2023, has filed for a foreclosure sale on the property, according to a local news report. Developer Five Star Development had previously filed a lawsuit against Madison claiming project interference and attempting to take over the project, according to the Arizona Republic and other sources.
Five Star alleges Madison and its affiliates have delayed funding and approvals and injected themselves into the process to cause chaos and generate financial concessions. Specific claims include approving unauthorized construction costs, directing unbudgeted work and withholding payment for hotel construction.
Madison has denied the allegations and filed a motion to dismiss the lawsuit in June, saying Five Star was undertaking a last-ditch effort to avoid the consequences of failing to fulfill its obligations. The motion to dismiss was suspended in July when Five Star filed an amended complaint.
Parts of the project, including several condo-style residential units referred to by the developer as “villas,” have been completed. Five Star claims Madison diverted resources to the villas to the detriment of the hotel portion.
Several of the villas have been sold for between $2.5M and $4.5M.
The Town of Paradise Valley, however, has halted issuing certificates of occupancy for newly completed villas because of failure to meet timeline obligations for the resort component. As a result, the complaint says, several villa buyers have backed out, and more have plans to do so, exacerbating the financial strain.
The unissued permits have stopped the sale of 40 villas, valued at a total of approximately $150M.
There is an Aug. 29 deadline for filings in the lawsuit to determine how quickly the case can proceed. Meanwhile, a trustee sale is scheduled for Nov. 12. The parties have until 5 p.m. Nov. 11 to present arguments and object.