Rooms at the Westin La Paloma Resort will undergo total renovation starting as early as this summer now that the Foothills resort has exited bankruptcy with a new owner. 

Barring what those involved say would be a surprising legal ruling in an appeal scheduled for Jan. 30, the stage has been reset on the value of lodging and resort properties in the Tucson region.

U.S. Bankruptcy Court Judge Eileen Hollowell on Jan. 18 approved plans for the Westin La Paloma Resort and Spa and a companion property, the Westin Hilton Head Island Resort in South Carolina, to emerge from Chapter 11 bankruptcy that, among other things, valued them together at $92 million. That's less than 40 percent of the $240.5 million owed on the debt when Tucson-based Transwest Resort Properties put them in bankrtuptcy protection Nov. 17, 2010.

Susan Boswell, the Quarles & Brady lawyer who handled the bankruptcy for Transwest, said that despite the devaluation, the lenders who were originally owed the $240.5 million will get their money back from the cash flows of the two resorts over the next 20 years.

La Paloma isn't alone. The six-year-old JW Marriott Starr Pass Resort and Spa, 3800 W. Starr Pass Blvd., appears headed for foreclosure Feb. 2 after going into court-ordered receivership last year when developer Signature Properties International defaulted on the mortgage owing $145 million. Negotiations to avert a foreclosure on the 575-room resort have, as of earlier this week, been unsuccessful.

To be clear, the issues over ownership doesn't mean a property is in imminent danger of closing.

Quite the contrary in the case of the Westin La Paloma, 3800 E. Sunrise Drive, where general manager Jonathan Litvack can hardly contain his excitement over the exit from bankruptcy even to the point of closing a PowerPoint presentation this week with the rallying cry, "we're going to take back the hill."

"That's not to take anything away from the fine job the others are doing but from our point of view, in less than two weeks time we've gone from the worst position in the market to the best," Litvack said. "Two weeks ago, we were still in bankruptcy with an uncertain future and now we've got a solid footing with the best future we could hope for."

Southwest Value Partners, a real estate investment company based in San Diego, acquired the La Paloma and Hilton Head properties out of bankruptcy. The company immediately announced it would spend $60 million between the two properties on rennovations and had signed a new 20-year management agreement with Starwood Hotels and Resorts, whose brands include Westin.

Southwest Value Partners was co-founded in 1990 by former Tucsonan Robert G. Sarver, who is now managing partner of the NBA Phoenix Suns and chairman and CEO of Western Alliance Bancorporation, a holding company that operates banks in four states, including Alliance Bank of Arizona. Sarver's father, Jack Sarver, was a prominent Tucson businessman who built the Plaza International Hotel (about to become Aloft, see separate story) and the Aztec Inn, now the Randolph Park Hotel and Suites, 102 N. Alvernon Way.

"We viewed this as an ideal reorganization situation involving incredibly high- quality assets that required strong ownership and equity to provide Westin with the tools necessary to position each hotel properly, allow them to emerge from bankruptcy, and maximize their operating performance," Mark Schlossberg, managing partner in Southwest Value Partners, said in a statement.

The La Paloma resort opened in 1986 and, although there have been some updates over the years this will be the first time the entire resort has undergone a complete renovation,

"This is a top to bottom project, we're not drawing any lines on this," Litvack said. Even meeting rooms and other space that has been added in recent years will be renovated. "Sometimes you might look at something and figure you can get some more use out of it, we won't be doing that here."

While there are still many details to work out, Litvack said construction could begin as early as this summer. In fact, one project upgrading the fitness facilities, was already designed and should be finished within two months.

While Marriott officials say they don't anticipate any changes in the day-to-day operation of the Starr Pass Resort, ownership remains a question.

Starwood and Marriott, along with other brands such as Hilton and Hyatt, don't own most of the hotels they operate. Instead, they have manage them in exchange for as much as 15 percent of operating revenues.

Meanwhile, the two Westin properties previous owner, Transwest Partners/NCH Corp. and its affiliated companies are still in bankruptcy court over other properties, including the Doubletree Hotel at Reid Park, 445 S. Alvernon Way; La Posada Lodge and Casitas, 5900 N. Oracle Road; Hampton Inn and Suites Tucson Mall, 2950 N. Oracle Road; and TownePlace Suites by Marriott Tucson, 405 W. Rudasill Road.

Another property, Embassy Suites Tucson Williams Center, 5335 E. Broadway, was taken over in December by Tucsonan Humberto S. Lopez who was a creditor in the hotel. Under the terms of that deal, an investment group that was owed $17 million now has a secured claim in the property of $7.5 million. Lopez paid $600,000 immediately and the remainder is in a promissary note that matures Nov. 30, 2018.

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