NEW YORK CITY-Five luxury resorts formerly controlled by a Morgan Stanley real estate fund filed Tuesday for Chapter 11 protection in US Bankruptcy Court here. In court papers, the five resorts, including Grand Wailea Resort and Spa, Arizona Biltmore Resort and Spa, La Quinta Resort and Club and PGA West, Doral Golf Resort and Spa and Claremont Resort and Spa, list more than 100,000 creditors and $2.2 billion of assets and $1.9 billion of debts as of Nov. 30, 2010.

CNL-AB LLC, a joint venture of Paulson & Co., Winthrop Realty Trust and Capital Trust Inc., acquired the five resorts and three others, collectively known as the MS Resorts portfolio, through a foreclosure proceeding this past Friday. The JV says in a release that affiliates of Paulson and Winthrop put the resorts into Chapter 11 to provide an opportunity “to further restructure the company's debt at the property level and to improve operations during a time of recovering fundamentals in the hospitality industry.”

All five properties had mortgage debt scheduled to mature on Tuesday. The Chapter 11 filing was done in conjunction with a “comprehensive restructuring at the corporate level,” effectively eliminating $800 million of debt and preferred equity. As a bit of irony, the Arizona Biltmore is the regular host hotel to the real estate industry's "Lodging Conference" and is slated to host 2011's gathering, as well.

According to the release, the filing does not involve the other three MS Resorts properties—the Ritz Carlton Grande Lakes, JW Marriott Grande Lakes and JW Marriott Desert Ridge—which are currently controlled by Capital Trust and its affiliates. Bloomberg reported Tuesday that CNL-AB LLC held junior debt that helped finance Morgan Stanley’s $6.7-billion purchase of CNL Hotels & Resorts Inc. in 2007. CNL Hotels & Resorts is no longer affiliated with CNL Financial.

In the release, CNL-AB LLC says the filing will have no impact on the management, staff or operation of the resorts. Pyramid Hotel Group will continue to act as asset manager for all eight resorts, the release states.

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