Ritz-Carlton Paradise Valley developer Five Star Development has filed for Chapter 11 bankruptcy in federal court.
The company behind the $2B resort and condo development at Scottsdale Road and Lincoln Drive says it wants legal protection from creditors so it can finish the resort, which it claims is nearly complete.
As originally planned, the overall development, known as The Palmeraie, includes the resort, villas, estate homes and a 29-acre commercial, retail and hospitality district.
The project’s primary creditor, Madison Realty Capital, had filed for foreclosure earlier this year, and the property was scheduled to go to auction this month. The bankruptcy filing creates an automatic stay to stop the foreclosure.
O’Melveny & Myers LLP is acting as Five Star’s attorney. The restructuring officer is Pivot Management Group.
Five Star says the hotel construction is nearly complete, and interior finishes are set to begin once it finalizes court approvals.
What Led to This Point?
Madison loaned Five Star $585M in 2023 to finish construction of the resort and residences. Some of the condo villas have been sold, but Five Star says resort construction has stalled.
Five Star filed a lawsuit against Madison, claiming Madison diverted resources to fund development of the villas rather than the resort.
The Town of Paradise Valley has a vested interest in seeing the resort completed so it can collect tax revenues. As a concession, it initially allowed the villa construction, in part to fund the hotel construction and keep it moving forward. A condition of that concession was “substantial progress” on the resort hotel. Since the hotel construction has stopped, the Town has stopped issuing certificates of occupancy on the villas.
Five Star claims in the lawsuit that cessation has halted sales of 40 villas, which would have generated $150M. (Source)