The historic Lodge on the Desert is back in bankruptcy court, just a year after completing a bankruptcy reorganization prompted by a default on a construction loan.
But an attorney for the boutique hotel says business will continue as usual as the owners work with new investors to refinance the business and restructure its debt.
The hotel’s owner, Lodge Partners LLC, filed for Chapter 11 bankruptcy reorganization on Wednesday, protecting the company from legal action while it works out plans to repay or shed its debts.
The historic boutique hotel at 306 N. Alvernon Way opened in 1936 and has 103 rooms, meeting spaces and a full service restaurant and lounge. It was renovated and expanded in 2007.
The Lodge filed for bankruptcy reorganization in 2013 when it was unable to pay about $11.5 million in construction loans form Wells Fargo Bank, and it emerged from bankruptcy in 2014 after restructuring its debts.
But the repayment plan failed and the hotel was unable to refinance its debt with a private investment firm that acquired the hotel’s loans from Wells Fargo, said Michael McGrath, bankruptcy attorney for Lodge Partners.
“The property hasn’t rebounded as quickly as we expected,” said McGrath, who represented the company in the earlier bankruptcy case.
Lodge Partners has hired John Rutherford, a management and business executive specializing in business turnarounds, to lead the restructuring effort.
A new investor group, Lodge in Tucson LLC, is expected to provide new financing and operating funds during the bankruptcy, subject to court approval, McGrath said.
The new funds will go to enhance the hotel’s guest experience, make additional improvements to the hotel and restaurant, and strengthen the hotel’s sales and marketing efforts, the company said.
The hotel staff will be maintained and all existing reservations for the hotel, for meetings and for the restaurant will be honored, the company said. The hotel’s third-party management company, Coastal Hotels Group, will continue to manage the property.
The hotel has not yet filed a schedule of assets and liabilities but indicated it expects to have funds available to repay unsecured creditors, including vendors.
McGrath said a new appraisal of the property should shrink the secured portion of the former Wells Fargo debt, adding that the company hopes to have a bankruptcy reorganization plan approved within about six months.
An initial meeting of creditors is scheduled for Dec. 29.
