Layton Construction Co. says it is owed $13 million and has ended its contract with an Arizona developer for work on the residential component of a sprawling $2-billion Ritz-Carlton resort in Paradise Valley, near Scottsdale and Phoenix. 

Dozens of subcontractors on the condominium project, begun in 2018, also have filed liens against the property in Maricopa County, and against its developer, Five Star Resort Owner LLC. Layton's lien states that another $2.3 million is owed separately to subs.

Layton was working as construction manager with a guaranteed-maximum price. It cited Arizona's Prompt Pay Act, which contains detailed rules covering nongovernmental construction, as providing it the right to terminate. The action, taken Jan. 28, was first reported by a local newspaper.

"This action comes after numerous written requests to Five Star Resort Owner asking that it honor its contractual obligations and pay many millions of dollars owed and long overdue to us and all subcontractors/suppliers," Layton says in a statement.

"This is not the ending we were expecting or hoping for," Layton's statement continues. "Unfortunately, we had no choice considering the millions of dollars long overdue and unpaid, despite repeated pleas to Five Star Resort Owner to pay the many local businesses and hard-working men and women who worked tirelessly, despite the constant threat of the COVID-19 pandemic, to build Five Star’s project."

Five Star, on the other hand, says it terminated Layton in December "due to the company's failure to meet performance and execution expectations."

Developer: Most Subs Remain at Work

David Humphreys, Five Star chief financial officer, says the company is replacing Layton with PWI Construction, and that the liens are an ordinary part of the transition. The project's first phase, which includes the resort, retail and residential component, is nearing completion. The liens do not indicate any "risk for noncompletion," he said, and the majority of the original subcontractors are onsite and working toward completion.

 "Contractors have been paid and are being paid" and processes exist to resolve any disputes, says Humphreys.

Ritz-Carlton, which is owned by giant Marriott Corp., is a luxury hotel brand that operates at 39 separate locations encompassing 11,833 rooms, according to Marriott's annual financial report. Its properties are developed and operated by franchisees. The Villas, the name given to the residential condominium component of the Arizona development, called the Palmeraie, is nearing completion on the first phase, says Humphreys.

At the time it signed its contract, Layton had already earned $9.4 million for pre-construction services. The construction manager's fee was set at 2.25% of the project's guaranteed maximum price, roughly $93.8 million, according to Layton.

Among subcontractors owed payments, according to Layton and liens filed by the companies, is Canyon State Electric, at $1.2 million, and Midstate Mechanical, at $206,000. Both subcontractors costs' are due in part, Layton claims, to "owner-caused schedule delays."