Ritz-Carlton developer one step closer to emerging from Chapter 11 bankruptcy

Article originally posted on Phoenix Business Journal on July 2, 2026

Scottsdale-based Five Star Development is one step closer to emerging from Chapter 11 bankruptcy protection as it works to get an ambitious $2 billion project back on track.

Five Star and its lender Madison Realty Capital have agreed on a term sheet, which was approved by a bankruptcy court judge June 30, that will provide the liquidity necessary for the debtors to continue pursuing restructuring efforts for The Ritz-Carlton Paradise Valley at The Palmeraie — a $2 billion luxury mixed-use project Five Star is developing near Lincoln Drive and Scottsdale Road in Paradise Valley.

At full buildout, the project is set to feature the 215-room Ritz-Carlton Paradise Valley Resort, 80 condominiums and 32 single-family homes along with a luxury shopping center called The Palmeraie. But the 122-acre project has been beset by financing issues and litigation over a decades-long development timeline.

Last fall, New York-based Madison Realty Capital filed a notice of trustee’s sale as part of its plan to foreclose on the property, alleging Five Star had defaulted on a $585 million construction loan tied to the project. But Five Star filed for Chapter 11 bankruptcy protection a few days before that scheduled foreclosure sale.

Now that the two parties have agreed on a term sheet, the agreement positions the company for a successful path toward emerging from Chapter 11, said Brendan Mann, president of The Solvere Group and listing broker for The Ritz-Carlton Residences on the property. The funds will add to the $32 million of debtor-in-possession financing Five Star secured from BH Capital Ventures LLC in February.

“Five Star believes this is a positive step that brings greater certainty to the project and benefits homeowners, purchasers, retailers, restaurants, creditors and the broader community,” Mann said.

Five Star required to sell Texas assets

As the bankruptcy process has played out, sales of the luxury villas at the community have continued. So far, 63 of the 80 villas have closed, with another two sales expected to close by next week, Mann said.

The term sheet calls for Madison to collect all net proceeds from villa sales to pay down the principal amount of debt. Madison’s claim is fixed at $570.31 million, and the agreement calls for a temporary truce on litigation. Madison is required to fund an initial advance of $8.5 million to Five Star within three days of the agreement’s approval. Another $20 million, less the initial advance, could be funded in $500,000 increments “no more than once every calendar month,” according to the term sheet.

In an effort to help pay down the debt, Five Star also is required to sell assets in El Paso, Texas. If these properties do not sell to a third party by Aug. 31, Madison has the right to buy them using a $90 million credit bid, reducing the total debt owed by that amount. If the assets sell for more than $90 million, up to $1.5 million will be added to the initial advance.

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