Lodge on the Desert reaches settlement with creditor

The new settlement between Lodge Partners and Palatine halts a pending foreclosure sale.   File photo

The owners of Lodge on the Desert have reached a settlement agreement with a creditor to help the Tucson hotel rise out of Chapter 11 bankruptcy status.

Lodge Partners LLC and mortgage lender Palatine Tucson LLC have worked out an agreement that also calls for extensive improvements to the 103-room hotel.

Late last year, Lodge Partners filed for Chapter 11 protection. It had applied for the bankruptcy protection once before, in 2013. This time, the group stated it had new investors who would hep fund improvements.

Palatine, which acquired about $12 million of Lodge’s debt from Wells Fargo Bank, requested dismissal of the bankruptcy case, stating it was an attempt to amend the original bankruptcy case after Lodge Partners defaulted on the plan.

The new settlement between Lodge Partners and Palatine halts a pending foreclosure sale.

“The successful reorganization of the Lodge enables us to strengthen our business, improve the property, honor our commitments to our customers and continue to grow,” John Rutherford, one of the parties who helped the hotel reorganize, said.

The agreement gives Palatine a $12.7 million secured claim on the property. Palatine will reissue the debt a five-year loan with a balloon payment at the end.

Lodge Partners also agreed to pay delinquent property, state and city taxes and put funds into an escrow account for future operations and taxes.

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