Luxury beach resort owner files for Chapter 11 bankruptcy

The company has $50 million in assets and $100 million in liabilities.

May 15, 2025 - 13:42

Luxury beach resort owner files for Chapter 11 bankruptcy

While conventional wisdom dictates that location is the most important factor in a successful real estate business, sometimes even the best-located companies struggle to bring in customers.

In February 2025, Allegiant Travel Company (ALGT) announced that it was looking to sell its 785-room Sunseeker Resort Charlotte Harbor resort in southwestern Florida after several years of poor financial performance.

While February is still the popular sun-seeking season, the resort had been operating at just 35% capacity at the time that Allegiant informed investors of its plans. The $322.8 million impairment charge to keep Sunseeker operating had resulted in a fourth-quarter net loss of $216.2 million; as of May, a buyer has still not been announced.

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'The debtors were forced to seek Chapter 11 relief': Company CFO

A significantly smaller company behind three luxury timeshare resorts on the Jersey Shore, Flagship Resort Development Corporation is now also asking for Chapter 11 protection in New Jersey bankruptcy court. The three resorts, Flagship Resort, Atlantic Palace and La Sammana, are all located on the Atlantic City boardwalk.

The petition filed in the U.S. Bankruptcy Court for the District of New Jersey states that Flagship currently haws $50 million in assets and $100 million in debts and other liabilities.

"Given the $8.3 million owed to the owners associations, the debtor's historically reduced margins, the potential costs of defending a lengthy class action proceeding, not to mention the risk of an adverse judgment therein, the debtors were forced to seek Chapter 11 relief," Flagship Resort CFO Cherie Parks said in the declaration first reported by legal outlet ProPublica.

The Jersey Shore is a popular summer vacation destination.
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Owners blame interest rates, Covid for financial problems

The declaration names higher interest rates and struggles recovering from the tourism dropoff during the Covid pandemic as the reasons Flagship has no other choice but to seek bankruptcy protection. It further said that over 40% of its owners defaulted on their mortgages after rising interest rates significantly decreased their value.

In 2019, 19 Flagship owners sued the company over what it claimed was deceptive advertising of the timeshares as a great investment. A New Jersey court eventually awarded $1,668,423.88 to the owners while Flagship also faced a second lawsuit in February 2023 and a class-action suit in April 2023.

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"Plaintiffs claimed that, during these presentations, defendant made various misrepresentations which induced them to purchase a Flagship Timeshare Interval," wrote the appellate court that confirmed the earlier ruling.

"These misrepresentations included: the timeshare interval was an investment akin to a conventional real estate interest; the value of the interval would increase over time; the timeshare interval was 'readily marketable' and that they could sell it at any time; there would be no increase in the annual maintenance fees over time; they would be able to exchange their intervals; they could book rooms at a resort whenever they wanted."

Development firm AC Boardwalk Investments LLC has offered a preliminary stalking horse bid to purchase Flagship for $45.5 million while the company will also hold an auction seeking higher bidders between July 16 and 18.

Lenders Banc of California and Colebrook Financial Co. have additionally entered into a debtor-in-possession financing plan to provide Flagship with approximately $5 million in funds.