Exterior of a Ritz-Carlton

Multiple contractors have filed liens totaling over $5 million against the Scottsdale, Arizona Ritz-Carlton Hotel, developed by Scottsdale-based Five Star Development.

The hotel complex is part of the Palmeraie, a luxury master-planned community including homes, shops, offices, and restaurants spread out over 122 acres.

Work on the hotel and its parking structure has attracted five liens from the project’s contractors. Midstate Mechanical Inc. of Phoenix, Arizona claimed the largest lien against Five Star — $2.8 million for HVAC work on the Ritz-Carlton.

Design Drywall West Inc. of Tempe, Arizona claimed a lien of over $1.5 million for labor, materials, and installation of metal stud framing and drywall. Bell Steel Inc. of Chandler, Arizona claimed a lien of over $1.7 million for iron fabrication and installation. All three companies were subcontractors on the project with Layton Construction Co. of Phoenix as the general contractor.

According to available project information, Layton Construction Co. works mostly as a general contractor and has worked on 690 jobs over the past 12 months. They average 4.8 stars out of 5 from reviews on their general contractor page with Levelset. Subs and vendors reported being paid on time on 93% of their projects.

Smaller liens were filed as well. Tovin Insulation Concepts claimed a lien of $17,589.60 from Five Star for work they did as an insulation contractor. The Norman S. Wright Company, Manufacturers Representative claimed a $6,752 lien. Milling Machinery, Inc. claimed a $209,718.08 lien after providing metal materials, construction, and labor.

Five Star Development is a commercial real estate developer that has developed over 20 million square feet of projects worth over $1.2 billion across the southwest. Subs and vendors reported being paid on time on only 35% of projects, according to their general contractor profile.

In summer 2020, Five Star Development sued the town of Paradise Valley over the Palmeraie. Five Star claimed the town demanded $2 million for underwater stormwater drainage infrastructure that Five Star said was not included in their initial agreement.

The Ritz-Carlton masterplan, by Mason Architects

COVID-19 hits hotels hard

Ritz-Carlton’s financial woes are likely tied to the COVID-19 pandemic. Hotels have suffered greatly since the COVID-19 pandemic restrictions and shutdowns began in the United States in March 2020. 

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In the American Hotel and Lodging Association’s 2021 State of the Industry Report, they stated that COVID-19’s impact on hotels was nine times greater than that of 9/11. They also wrote “Hotels were one of the first industries affected by the pandemic after travel was forced to a virtual halt in early 2020, and it will be one of the last to recover.”

The report expected business travel to lag at least 85% through April and cited a survey stating that over 56% of Americans viewed vaccination as a key to travel.

The Arizona lien isn’t the only lien related to a Ritz-Carlton project since the start of the COVID-19 pandemic. In April 2020, Plaza Construction Group Florida LLC filed a $7.7 million lien on the Ritz-Carlton South Beach Hotel and Resort for services rendered on a multi-year renovation project.

Marriott International purchased the Ritz-Carlton brand in 1998. In an annual report submitted to the SEC for the 2020 fiscal year, Marriott International wrote the following:

“More hotel projects in our development pipeline may be canceled or delayed in opening, which could adversely affect our growth prospects. We report a significant number of hotels in our development pipeline, including hotels under construction, hotels subject to signed contracts, and hotels approved for development but not yet under contract. The eventual opening of such pipeline hotels and, in particular, the approved hotels that are not under contract, is subject to numerous risks.”

The Ritz-Carlton, Midstate Mechanical Inc., Layton Construction Co., and Design Drywall West did not return requests for comment.