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Owners of the JW Marriott Starr Pass Resort & Spa in Tucson, Arizona Facing
Foreclosure After Defaulting on a $145 million Loan;

Hotel Remains Profitable, Court Appointed Receiver to Assume Financial Affairs
and Will Have No Effect on Day to Day Operations

By Dale Quinn, The Arizona Daily Star, TucsonMcClatchy-Tribune Regional News

Nov. 16, 2011--The JW Marriott Starr Pass Resort & Spa -- the earth-toned luxury hotel perched in the saguaro-strewn slopes of the Tucson Mountains -- is facing foreclosure.

The owner of the 575-room hotel, Starr Pass Resort Developments, has defaulted on a $145 million loan recorded in August 2006, says a foreclosure notice filed in the Pima County Recorder's Office.

An auction on the property has been scheduled for 1 p.m. Feb. 2 on the eastern steps of the Pima County Courthouse, 110 W. Congress St.

The resort property includes a 20,000-square-foot spa, a 27-hole Arnold Palmer-designed golf course, three swimming pools and 88,000 square feet of meeting space. The default also includes some small parcels in related developments.

The beneficiary on the loan is U.S. Bank National Association, the notice says.

The resort's management met Tuesday with a court-appointed receiver who will take over the property's financial affairs. Alex Ahluwalia, the resort's general manager, said the appointment of that receiver will have no effect on the Marriott resort's day-to-day operations.

"This is purely a matter between the owner and the lender," Ahluwalia said.

"The hotel has always been profitable and it's still today profitable," he said.

Developer Christopher Ansley opened the resort at 3800 W. Starr Pass Drive in 2005, planning to ramp up its business to a stabilization point, then sell it. He listed it with the real-estate brokerage Jones Lang Lasalle in 2007, but with property values plunging, it didn't sell.

The resort's loan matured in August 2010 and Starr Pass Resort Developments failed to make the required payments. Because of that, the full balance of the $145 million loan is due, the lender said in Pima County Superior Court documents arguing for the appointment of the receiver.

Adding a wrinkle to the negotiations is an additional $20 million mezzanine loan Ansley borrowed from RFC CDO 2006-1 Ltd. to pay for the resort.

In a September 2010 interview, Ansley said he'd been able to reach a loan modification with the servicer on the $145 million senior loan, but he'd hit an impasse on restructuring the mezzanine loan, which is similar to a second mortgage.

Attempts to reach Ansley on Tuesday afternoon to discuss any current debt negotiations were unsuccessful.

Starr Pass isn't the only major resort in Tucson to feel the pressure of foreclosure after struggling to make mortgage payments.

The Westin La Paloma Resort and Spa, 3800 E. Sunrise Drive, filed for Chapter 11 bankruptcy protection last November to reorganize its debt as its lender threatened foreclosure.

That resort's owner, Transwest Partners/NCH Corp., had also been struggling to make mortgage payments on another of its properties, the Westin Hilton Head in South Carolina.

The financial troubles for those resorts stem largely from Trans- west's acquisition of the two Westin properties in 2007, when property values peaked.

By filing for bankruptcy, the owners of the Westin were able to halt any foreclosure proceedings.

Resorts saw their occupancy fall with the onset of the recession and had to slash room rates to stay competitive.

But there are some signs that the market has begun to stabilize.

Occupancy at Tucson hotels was up 6.3 percent in September compared with the same period the previous year, according to the firm STR, also known as Smith Travel Research.

Tucson hotels' RevPar -- which stands for revenue per available room -- also increased, jumping 11.1 percent in September compared with September 2010, STR's numbers show. Since May, revenue per available room at Tucson hotels has been higher each month than in the previous year.

RevPar, which is a good indicator of hotel industry health overall, hit a low in 2009, according to the data.

Starr Pass' numbers reflected that stabilization from 2010 to 2011, Ahluwalia said.

DID YOU KNOW?

Christopher Ansley has been developing the Starr Pass area since 1992, when his company, Signature Properties International, bought the original 1,000-acre site for around $15.5 million.

The Toronto native got the city to rename 22nd Street west of Interstate 10 as Starr Pass Boulevard.

Source: Star archives

Contact reporter Dale Quinn at dquinn@azstarnet.com or 573-4197.

___

(c)2011 The Arizona Daily Star (Tucson, Ariz.)

Visit The Arizona Daily Star (Tucson, Ariz.) at www.azstarnet.com

Distributed by MCT Information Services



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