Welcome to the Phoenician
Welcome to the Phoenician. Your Host? Why, the Federal Government With PM-S&Ls On Main Street II
SCOTTSDALE, Ariz. (AP) _ English tea is served under ceilings decorated with gold leaf. Marble bathrooms have speakers for television sound. A pool is lined with mother-of- pearl tile. Five-foot-tall rare porcelain vases stand guard at the entrance to a French restaurant. Employees stand in hallways just to answer any questions that might happen by.
To some, the Phoenician resort epitomizes excellence. To others, it is a monument to excess and extravagance paid for by the now-insolvent Lincoln Savings & Loan.
But for anyone who spends a night there, it’s hard to believe this $275 million desert oasis actually is a government-owned and operated property.
″If the government’s running it, they’re doing a wonderful job. I’d say this is one of their more successful ventures,″ Frederick Shaw, a Westfield, N.J., physician, said with a chuckle. ″It’s the nicest resort I’ve ever stayed in.″
″Club Fed,″ as it is called locally, was seized by FBI agents last November after federal regulators took over Lincoln from Charles Keating, the Phoenix developer blamed for one of the costliest of all S&L failures.
As if the Phoenician’s ownership wasn’t troublesome enough, Iraq’s invasion of Kuwait created some figurative ripples through the seven swimming pools here, too.
Lincoln Savings owned 55 percent of the resort - the share now in the hands of the federal Resolution Trust Corp. The London-based Kuwait Investment Office owns the remaining 45 percent.
″They assured us the investment is secure,″ Phoenician spokeswoman Sally Cooper said of the Kuwaitis.
The U.S. government continues to run the palm-filled oasis, hiring an Austrian hotelier to manage the 130-acre resort until a buyer can be found.
No attempt has been made to sell the hotel because of pending litigation, and the Kuwaitis have the first right of refusal, RTC spokesman Kevin Shields said.
The Phoenician is one of the best-known of all the thousands of properties now in the hands of the federal government, acquired through failed S&Ls.
It became both a symbol of the S&L excess, and a battleground for Keating, who claims S&L regulators didn’t understand his business and conspired to ruin his deals.
Regulators, for their part, claim Keating looted Lincoln Savings, using it as his own piggy bank to finance a lavish lifestyle for his family and build speculative ″white elephant″ projects like the resort, which they say has lost millions since its October 1988 opening.
″It’s very opulent and extravagant,″ Shields said. ″This is not something S&Ls should go around building.″
So heated is the feud between Keating and regulators that when the government ousted Keating’s management of the Phoenician, FBI agents confiscated documents and changed the locks on the doors.
Phoenician management now says the resort is breaking even on a cash-flow basis. But that’s not a true picture, the RTC says, because the Phoenician’s balance sheet carries no debt - Lincoln footed the $275 million bill for building the resort.
″The question is, can it really make a profit?″ Shields said. ″What price will we be able to sell it in order for the buyer to make it profitable?″
While all the wrangling has gone on, few if any reservations have been canceled because of the mess.
″Really, all of this has not had any adverse effect. If anything, curiosity was piqued,″ said Ms. Cooper.
Dennis Beljan was curious. He and his wife came from nearby Mesa, Ariz., for a golf holiday because ″I knew it was supposed to be a super property.″
″It exceeds some of the higher quality resorts in the area,″ Beljan said. ″You don’t feel any government presence at all.″
EDITOR’S NOTE - Scott McCartney is the AP’s Southwest Regional Reporter, based in Dallas.