Bankruptcy Watch: Ritz-Carlton Paradise Valley and the F-Star Socorro Liquidating Plan

Ritz-Carlton Paradise Valley Bankruptcy Filing

The Ritz-Carlton Paradise Valley development in Arizona is moving toward a court-supervised liquidation after nearly a year in Chapter 11.

F-Star Socorro, L.P. and affiliated debtors filed for Chapter 11 protection on November 4, 2025, in the U.S. Bankruptcy Court for the Southern District of Texas. The broader estate includes the unfinished Ritz-Carlton Paradise Valley resort, Ritz-Carlton-branded villas, undeveloped land in Scottsdale and Paradise Valley, and commercial real estate in El Paso and Socorro, Texas. On October 14, 2026, the Ritz Project Debtors filed an amended joint liquidating plan that provides a clearer picture of how the restructuring may ultimately unfold. Rather than reorganizing the development under its existing management, the plan would transfer the remaining assets to a plan trust, replace current management with Chief Restructuring Officer Lance Miller, market the Ritz-Carlton resort for sale, and preserve substantial litigation against lender RC PV Lender I LLC and its affiliates, including Madison Realty Capital, collectively referred to as Madison.

The result is a restructuring in which the resort, villas, undeveloped land, Texas properties, lender claims, and litigation each follow different recovery paths.

Case Snapshot

Item	Detail
Lead Debtor	F-Star Socorro, L.P.
Filing Date	November 4, 2025
Court	U.S. Bankruptcy Court, Southern District of Texas
Case Number	25-90607
Principal Project	Ritz-Carlton Paradise Valley
Resort	215 rooms, including 78 guestrooms and 137 casitas
Residential Component	Remaining units within 80 Ritz-Carlton-branded villas
Other Assets	Palmeraie land, Ritz-Carlton estate lots, El Paso and Socorro commercial real estate
Principal Lender	RC PV Lender I LLC and affiliates, referred to as Madison
Madison Construction Loan Claim	Approximately $570.31 million for plan purposes
Current Strategy	Joint liquidating plan and asset sales
Chief Restructuring Officer	Lance Miller

The proposed plan covers the Ritz Project Debtors but does not encompass every affiliated company within the broader F-Star structure. That distinction becomes important because different assets and entities are being resolved through different transactions.

The Development Behind the Bankruptcy

The principal asset is the Ritz-Carlton Paradise Valley resort at 7000 East Lincoln Drive in Paradise Valley, Arizona. According to the plan materials, the unfinished ultra-luxury resort includes 78 traditional hotel guestrooms, 137 casitas, and restaurant, retail, meeting, and ballroom space. The estates also hold remaining unsold units in the 7000 East Lincoln Villas Condominium, which originally included 80 Ritz-Carlton-branded residences integrated with the resort. Additional real estate includes undeveloped Palmeraie parcels and Ritz-Carlton estate lots in Scottsdale and Paradise Valley, together with commercial and industrial properties in El Paso and Socorro, Texas.

The multi-asset structure is central to understanding the case. This is not simply an unfinished hotel bankruptcy. It is a restructuring involving multiple entities, distinct asset classes, separate creditor rights, and different paths for realizing value.

For readers newer to these concepts, our guide to What Is Bankruptcy Remoteness and Why Does It Matter? explains why commercial real estate financings often place individual assets into separate special purpose entities and why those boundaries can become particularly important when distress occurs.

The October Plan Changes the Direction of the Case

The October 14 amended plan is a liquidating plan rather than a conventional operating reorganization. On the effective date, the remaining assets of the Ritz Project Debtors would transfer to a plan trust. Existing management would be deemed to resign, and CRO Lance Miller would become the initial trustee as well as the sole manager, director, and officer of each debtor.

The trust would be responsible for selling assets, administering distributions, preserving estate value, and pursuing claims against Madison. That structure means confirmation would not restore the project to its pre-bankruptcy operating model. Instead, control of the remaining assets would move into a post-confirmation vehicle focused on monetizing assets and distributing recoveries.

The Ritz-Carlton Resort Would Be Marketed for Sale

The most important component of the plan is a sale of the Ritz-Carlton Paradise Valley resort. Between confirmation and the plan’s effective date, the debtors would market the resort and its furniture, fixtures, and equipment through court-approved Section 363 bidding procedures. The debtors may also include undeveloped real estate in the same process or offer those parcels separately. The resort sale must close within six months after the court approves those procedures. That deadline may be extended twice for additional six-month periods.

Because the resort remains unfinished, prospective buyers must demonstrate more than the ability to fund an acquisition. A qualified bidder must identify an experienced hotel developer acceptable to the debtors, provide a sources-and-uses plan for completing the development, and give the plan trustee reasonable consultation rights regarding future construction.

The buyer therefore would be taking responsibility not only for the existing real estate but also for completing a major luxury hospitality project.

Existing Equity Could Still Purchase the Resort

The plan gives existing parent equity holders or their designees a separate opportunity to acquire the resort without an auction. The option covers the hotel, its FF&E, and certain undeveloped real estate. The minimum purchase price begins at approximately $570 million and is then adjusted for Madison’s DIP and bonding claims, the amount required to pay general unsecured creditors in full, the $90 million credit associated with the El Paso transaction, and villa proceeds previously paid to Madison. If the option is exercised by the deadline established in the hotel bidding procedures and the purchaser satisfies the qualified-bidder requirements, the broader marketing process would terminate. If it is not exercised, the resort would proceed through the competitive sale process.

The plan therefore leaves open several possible ownership outcomes. The eventual buyer could be existing equity, a third-party hotel developer, or Madison through a credit bid.

Madison’s $570.31 Million Claim Remains Central

Madison occupies the most important creditor position in the proposed restructuring. For plan purposes, Madison’s construction loan claim is treated as allowed at approximately $570.31 million. Interest at SOFR plus 5.75% may also be added to the extent payable under the parties’ June 2026 term sheet. The claim nevertheless remains disputed. The debtors and the future plan trust preserve defenses, setoffs, counterclaims, and affirmative claims that could reduce Madison’s recovery. The trust would take control of litigation currently pending against Madison in Arizona and Texas. The trustee would have authority to prosecute, settle, sell, or abandon those claims and could obtain litigation financing if necessary. Madison is not included among the parties receiving releases under the plan. That creates an unusual relationship. Madison would receive senior economic rights under the plan while simultaneously remaining the defendant in litigation that could alter the amount or timing of its recovery.

The El Paso Properties Would Reduce Madison’s Claim

The Texas commercial properties are being addressed separately. Madison has been designated the successful bidder for the El Paso and Socorro assets through a credit bid. Subject to court approval, those properties would transfer to Madison or its designee, and Madison’s construction loan claim would be reduced by approximately $90 million. The properties include approximately 190,000 square feet at 1340 Bob Hope Drive in El Paso, vacant land in Socorro, and warehouse and distribution facilities totaling more than 860,000 square feet. The transaction remains subject to the plan’s clawback mechanism. That means the ultimate economic value credited to Madison may still be affected by the outcome of the parties’ litigation and related court determinations.

The Villas Follow a Different Recovery Path

The Ritz-Carlton villas receive their own treatment under the plan. Net proceeds from future villa sales, after brokerage commissions, closing costs, and royalty fees, are directed solely to Madison in satisfaction of its DIP and construction loan claims. Other plan trust beneficiaries do not participate in those proceeds. The debtors or trustee may continue selling the remaining villas under the existing sales procedures. Alternatively, individual villas may be transferred or abandoned to Madison in exchange for reductions in its construction loan claim. This treatment shows how separate asset classes within the same development can produce very different creditor outcomes. Villa proceeds primarily reduce Madison’s secured exposure, while hotel and undeveloped-land proceeds move through the broader trust structure.

Madison May Seek to Credit Bid for the Resort

Madison may also attempt to acquire the resort through a credit bid. The proposed hotel bidding procedures preserve the debtors’ right to ask the court to limit or deny Madison’s credit-bid rights under Section 363(k). Any challenge could be based on disputes regarding Madison’s underlying claims. If Madison becomes the successful bidder, both the acquisition and the amount credited against its construction loan claim would remain subject to the clawback and the estates’ preserved defenses and claims. Potential bidders must also disclose any financing, sponsorship, or equity relationship with Madison. A sale involving a buyer funded or controlled by Madison may likewise become subject to the clawback. As a result, the resort sale and the Madison litigation remain closely connected.

Separate Entities Still Matter Under the Plan

The amended plan does not collapse the entire F-Star enterprise into one debtor group. Seven affiliated Commercial Property Debtors are excluded from the Ritz Project Debtors’ plan. Their assets or ownership interests are instead expected to be addressed through a separate transaction involving one or more sales, refinancings, recapitalizations, or similar transactions. The Ritz Project Debtors would also be substantively consolidated only for limited purposes, including voting, confirmation, and distributions. Their separate legal existence otherwise remains intact. Intercompany guarantees and joint and several liabilities would be eliminated for plan purposes, and duplicate claims would be treated as a single claim. That distinction is especially relevant in a multi-entity real estate structure. Bankruptcy can coordinate claims and distributions without necessarily eliminating every underlying legal boundary.

Our educational article on bankruptcy remoteness provides additional background on why lenders use separateness covenants and entity-level restrictions to isolate property-level risk.

Entity continuity is another, separate issue. A Springing Member and an Independent Director serve different functions: the Independent Director participates in specified material decisions, while the Springing Member generally exists to preserve the continuity of a single-member LLC if its sole member ceases to be a member.

DIP Financing Helped Preserve the Case

The plan also resolves several postpetition financing arrangements. B.H. Capital Ventures became the replacement DIP lender under a secured superpriority facility in February 2026. Those claims are expected to be resolved through a separate Commercial Property Transaction and must be paid in full in cash before the plan becomes effective. Madison separately provided an $8.5 million postpetition advance carrying a 16% interest rate. Under the plan, those DIP claims would be allowed and paid from villa sale proceeds before the effective date. Corebridge also holds adequate protection claims and junior liens that are expected to be resolved through the Commercial Property Transaction. Net proceeds remaining after those obligations are addressed would be loaned to the plan trust to fund administrative claims and trust expenses. The financing structure therefore connects assets outside the core resort sale to the liquidity required to implement the overall plan.

How the Plan Trust Waterfall Works

Recoveries would ultimately be distributed through several classes of plan trust interests.

Madison’s bonding and construction loan claims receive A Interests. Certain unpaid professional claims may receive B Interests. General unsecured creditors receive C Interests. Insider and affiliate claims receive subordinated D Interests, while qualifying parent equity receives residual E Interests. That structure places Madison and certain administrative claims ahead of general unsecured creditors, with insiders and equity further down the recovery structure. The trust generally must terminate within five years, although limited extensions may be approved by the bankruptcy court. Confirmation therefore would not necessarily end the restructuring. Asset sales, litigation, and distributions could continue for several years.

The Ritz-Carlton Brand Agreements Would Continue

The plan proposes to assume three agreements with The Ritz-Carlton Hotel Company: the residential license and development agreement, the pre-commencement agreement, and the operating agreement. Ritz-Carlton would waive any cure amounts and receive no plan distributions. Preserving those agreements could be significant to the future sale. The resort’s value is closely tied to its ability to remain a Ritz-Carlton-branded project, particularly for a buyer that must invest additional capital to complete the property.

Governance Would Shift to the Plan Trustee

The amended plan also creates a complete transition in governance. Existing management would resign when the plan becomes effective. Lance Miller, as plan trustee, would become the sole manager, director, and officer of each Ritz Project Debtor while controlling the trust’s assets and administering the liquidation. The trustee would oversee asset sales, litigation, creditor distributions, preservation expenses, and potential additional financing. The change is significant because decisions concerning completion of the resort, disposition of undeveloped land, litigation against Madison, and creditor recoveries would no longer sit with the original development management.

For additional background on how independent governance works before distress, our guide to Independent Directors in Bankruptcy-Remote SPEs explains why lenders often require an independent decision-maker for specified material actions and how that role differs from day-to-day management.

Key Dates and Events

Date	Event
May 11, 2023	Madison construction loan agreement signed
November 4, 2025	F-Star Socorro and affiliated debtors file Chapter 11
February 20, 2026	B.H. Capital Ventures becomes replacement DIP lender
June 2026	Madison provides $8.5 million of postpetition financing
October 14, 2026	Ritz Project Debtors file amended joint liquidating plan
After bidding procedures approval	Marketing and sale process for the Ritz-Carlton resort begins
Within six months after approval	Initial deadline to complete resort sale
Possible extensions	Two additional six-month sale extensions permitted

The plan also establishes post-effective-date deadlines for administrative claims, professional fees, claim objections, and rejection damages.

What Happens Next

The next major issue is confirmation of the amended liquidating plan and approval of the hotel sale framework. If the plan becomes effective, the focus of the case will shift from maintaining the Chapter 11 estates to executing asset sales and administering the trust. The Ritz-Carlton resort will then become the most important transaction to watch. Existing parent equity may exercise its purchase option, third-party developers may bid for the property, and Madison may seek to participate through a credit bid. At the same time, the trustee would continue pursuing the Madison litigation, oversee remaining villa and land sales, and administer creditor recoveries through the trust. The eventual outcome will depend on several interconnected factors: the price obtained for the resort, the amount ultimately allowed on Madison’s claims, whether existing equity exercises its purchase option, how the clawback is applied, and the value of the claims retained by the trust.

Bottom Line

The Ritz-Carlton Paradise Valley bankruptcy illustrates how a large mixed-use development can fragment into separate restructuring paths once the project enters Chapter 11. The resort itself is headed toward a court-supervised sale. Ritz-Carlton villas primarily support Madison’s secured recovery. El Paso and Socorro properties are being transferred through a separate credit-bid transaction. Undeveloped Arizona land may be sold with the resort or independently. Litigation against Madison will continue through a plan trust. At the same time, the plan preserves meaningful distinctions between the entities and asset groups involved. Those boundaries continue to affect collateral, recoveries, governance, and the mechanics of the restructuring even as the bankruptcy process coordinates the broader case. The central question now is not simply whether the Ritz-Carlton Paradise Valley project can be completed. It is who will ultimately acquire and finish the resort, how much value the remaining assets generate, and how those proceeds will be allocated across a complicated creditor and entity structure.

Sources

F-Star Socorro, L.P., Chapter 11 Plan Terms and amended joint liquidating plan materials, October 14, 2026.

U.S. Bankruptcy Court for the Southern District of Texas, In re F-Star Socorro, L.P., Case No. 25-90607.