W Hotel Scottsdale Foreclosure Begins
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Foreclosure proceedings begin against ‘W’ developer
The bank that financed the new W Scottsdale Hotel and Residences has begun foreclosure proceedings, the latest in a string of recent legal and financial woes for the high-profile project.
HSH Nordbank,a German lender, filed a notice of trustee’s sale, the legal precursor to a forced sale of the 224-roomproperty near Scottsdale Fashion Square. A public auction is scheduled for April 15 unless the matter is resolved before then or the auction is postponed.
The bank loaned the W’s developer, Triyar Hospitality Scottsdale LLC, $73 million, according to Maricopa County documents. The documents do not say how much Triyar owes or how far behind it is in payments.
Triyar Chief Executive Officer Michael Mahoney declined to comment.
The trendy W, which debuted in September more than a year behind schedule, remains open. It is managed by hotel giant Starwood Hotels and Resorts, which owns and manages the Phoenician Resort and also manages several other resorts in Arizona.
Arizona’s first W, at 7277 E. Camelback Road, was highly anticipated by hip travelers and fans of Scottsdale nightlife. It features a second-story infinity pool with a popular bar and mountain views, an outpost of Los Angeles sushi hotspot Sushi Roku and a lobby bar called the Living Room.
The timing of the opening probably couldn’t have been worse, with the recession and a spike in new hotel rooms sharply pushing down occupancy and room rates. The metropolitan Phoenix hotel market has seen among the biggest declines in the country in key industry measures for several months running, according to Smith Travel Research.
The first public hint of financial problems came in November, when Scottsdale-based Hunt Construction Group, the general contractor on the hotel, filed a $20 million lien against Triyar for nonpayment.
Triyar responded with a lawsuit against Hunt for breach of contract, blaming it for excessive cost overruns and delays and saying its work was poor.
The original budget for the hotel portion was $57 million, according to the contract with Hunt. Hunt said it did $21.7 million in extra work at Triyar’s insistence. It started foreclosure proceedings of its own.
Several subcontractors also have filed liens against the hotel, and a couple followed up with lawsuits.
They all likely will now have to get in line behind HSH Nordbank. Construction lenders typically have super priority in such cases, real estate attorneys say.
“Contractors can be left holding the bag,” said Ron Messerly, a partner in the Phoenix law firm of Snell & Wilmer.
Hunt officials did not respond to calls requesting comment.
How the foreclosure unfolds will depend in part on Triyar’s moves. It is not unusual for developers to file for Chapter 11 bankruptcy when faced with the prospect of a trustee’s sale.
“What you want to do is slow down the foreclosure process,” Messerly said.
The contractors, for their part, will likely try to dispute the lender’s priority status or sue the lender to recover what their owed, among other moves, he said.
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