November 26th, 2025
How We Got Here
The story is part pandemic-era economics, part skyrocketing construction costs, and part deteriorating trust between the developer and its lender, Madison Realty Capital. Five Star Development borrowed roughly $585 million to complete the project. According to public filings, delays mounted and the long-promised hotel remained unfinished.
Earlier this year, Madison Realty Capital moved to foreclose, scheduling a sale for November. Five Star responded with a Chapter 11 bankruptcy filing, an attempt to pause the foreclosure and keep control of the project. A Chapter 11 is not a liquidation, but rather a reorganization. In large commercial foreclosure actions this is a common borrower strategy to force a lender to the table under court supervision.
Dueling Allegations
The bankruptcy documents lay bare how far the relationship between the developer and its lender has unraveled.
Five Star accuses Madison Realty Capital of deliberately withholding funds, refusing required approvals, and using “weaponization” strategies designed to force default and take over the project at a discount. The developer says these actions triggered construction stoppages and cost overruns that jeopardized the entire venture.
Madison, for its part, paints a very different picture. It claims Five Star mismanaged timelines, mishandled expenditures, and consistently failed to meet contractual obligations. The lender frames the bankruptcy not as a rescue attempt but as a tactic to stall a rightful foreclosure on a severely over-budget and long-delayed development.
It is a striking standoff: a developer blaming the lender for sabotage, and a lender blaming the developer for incompetence.
What Happens to the Ritz-Carlton Brand?
For our community, perhaps the most profound question is what happens to the Ritz-Carlton name itself.
Hotel management agreements, especially those involving brands like Ritz-Carlton (owned by Marriott), are complex, long-term contracts. Bankruptcy courts have broad authority under federal law to approve or reject these agreements if doing so is the best course of action to resolve the conflicting claims in a fair, balanced way. At the same time, operators like the Ritz-Carlton often reserve the right to walk away when the owner defaults or enters bankruptcy.
Historically, U.S. courts have allowed both outcomes. In some cases, the operator stays and the project survives with a new financing arrangement, new ownership, or both. In other situations, the brand exits, and the project re-emerges with a new well-known brand, or no national brand at all.
Translated into human terms: the Ritz-Carlton name on the wall is not guaranteed to remain. Neither is its departure inevitable. Much depends on the next few months inside the bankruptcy court.
Possible Futures for Paradise Valley
As residents, we understandably want stability. We want the resort completed, the promises kept, and the long-delayed economic and aesthetic benefits finally delivered. But the path forward could take several forms:
- A Reorganization and Completion Under New Financing. If Five Star secures debtor-in-possession funding and can satisfy the court and creditors, the project may continue with the Ritz-Carlton brand still in place.
- A Foreclosure and a New Owner. Madison Realty Capital could ultimately take control, restructure the project, and partner with a different luxury operator if Ritz-Carlton elects to terminate... or if the court allows the contract to be rejected.
- A Completed Project Without the Ritz-Carlton Flag. Should the brand choose to terminate the contract, or a new owner be permitted by the court to cancel it, Paradise Valley could lose the Ritz-Carlton brand.
Regardless of the outcome, the most important priority for Paradise Valley is completion. An unfinished luxury resort in the center of town benefits no one. A finished project, even if the branding changes, still brings the economic vitality and elevated home values we have long expected.
A Moment for Realism... and Optimism
This moment is undeniably unsettling. But we should remember that a Chapter 11 bankruptcy is not a burial. It is a restructuring tool. Some of the world’s most iconic resorts, from New York to Hawaii, have passed through similar legal storms to emerge successful.
The coming months will tell us whether the parties involved are willing to work toward that outcome. For our community, the hope is simple: that the promises made when this project was first announced are finally delivered, and that the heart of Paradise Valley gains the landmark resort we have a right to expect.
