Lodge on the Desert has filed for Chapter 11 bankruptcy reorganization, but its attorneys emphasize that "business as usual" will continue for the 77-year-old Tucson hotel, its employees and customers.
Lodge Partners LLC, which has owned and operated the midtown boutique hotel since 1997, says it was unable to repay a Wells Fargo construction loan, leading the bank to start receivership proceedings against it on May 8.
Also, a proposed sale of the property to an undisclosed real estate investor for $8.2 million fell through, the company says.
The lodge's liabilities are likely to be listed at $15 million to $18 million, while its assets are believed to be between $5 million and $9 million, its bankruptcy attorneys, Isaac D. Rothschild and Kasey Nye of Mesch, Clark & Rothschild P.C., said in an interview Monday.
Lodge Partners' court filing lists as its largest unsecured claim a $11.58 million construction loan from Wells Fargo, of which $7.5 million was secured.
"The downturn in the economy has greatly affected our business," owner Dan Donahoe of Lodge Partners said in a news release Monday. "This is an industrywide challenge that has affected several of our counterparts in recent years."
Lodge on the Desert, located on North Alvernon Way just north of Broadway, announced in February that it had finished a 10-year, $15 million retooling, which also expanded the hotel from 35 rooms to 103 rooms.
The extensive remodeling and larger size leave the hotel, its restaurant and banquet facilities in a better economic position, despite the difficulty repaying the loan, Rothschild and Nye said.
Also, Lodge Partners says in its filing that business is improving, that its revenue per available room has been increasing this year, and that the hotel "is gaining occupancy market share" according to a Smith Travel Research report in March.
Lodge Partners also says it expects to receive "a substantial investment" of new capital from original investors within the company. The amount was not made public.
"No employees will be laid off and no employee will miss a paycheck as Lodge owners work with lenders to reorganize debt," Lodge on the Desert General Manager Frank Rodriguez and attorney Rothschild said in the news release.
Nye added by telephone Monday: "We're in talks with Wells Fargo. Employees are in no danger."
All hotel events will go forward as planned, such as weddings and corporate conferences; all reservations will be honored; and vendors will be paid, said Rothschild and Nye.
"The process will leave the hotel in a strong position to continue serving visitors and residents for decades to come," Rodriguez and Rothschild's news release said.
Contact Norma Coile at ncoile@azstarnet.com or 573-4663.
