Ritz Developer Sues Town, Alleges ‘Shakedown’

Credit: Town of Paradise Valley

By Melissa Rosequist for Independent Newsmedia 
A lawsuit between Five Star Development — the entity behind the forthcoming Ritz-Carlton Paradise Valley — and the Town of Paradise Valley has emerged in the Superior Court of Arizona, records show. 
The June 25th  complaint seeks declaratory judgment on Five Star’s legal responsibilities to pay for the costs of underground drainage structures — a point of contention for both sides within the development agreement — as well as a judgment that it is entitled to credits for plan review fees; and requesting the town must pay $1M toward Five Star’s portion of the cost of street improvements. 
Paradise Valley officials believe they have acted fairly, responsibly and correctly, citing to refuse any closed-door rezoning agreements for the Five Star property without going through an open and transparent public process. 
The lawsuit lists Five Star Development as the plaintiffs, while the Town of Paradise Valley, Mayor Jerry Bien-Willner, and the other six Town Council members as named as defendants. 
The town and Five Star Development, spearheaded by President Jerry Ayoub, have been working together to see the reality of a 105-acre swatch of land near Scottsdale Road and Lincoln Drive be transformed into a mixed-use resort and housing property for several years. 
In January 2016, the then-Town Council voted to approve a development agreement between the two entities. 
The agreement speaks to tax revenues over the next 30 years, phasing of construction and identification of a luxury resort operator, which in this case is explicitly the Ritz-Carlton. 
A source close to the situation says the development agreement is at the crux of this matter, as Five Star seeks to receive certificates of occupancy for some of its dwellings — while the agreement stipulates the Ritz-Carlton hotel must be constructed and operating prior to certificates being granted. 
Through an investment of $130M, Ritz-Carlton’s initial plans were to build a Ritz-Carlton branded resort community that includes seven development-area characteristics: 

  • Area A: 215-room resort; 
  • Area A1: 94 resort-branded villas; 
  • Area B: 66 single-family homes; 
  • Area C: 45 resort-branded, single-family homes; 
  • Area D: 53 townhomes; 
  • Area E1: A 54KSF square-foot luxury retail center on 7.2 acres 
  • Area E2: Influx design as the use of 5.7 acres is yet to be determined 

Original construction timelines estimated the resort opening in late 2018. 
Sources say the hotel is probably a year away from being completed, while a press release from Five Star in June stated the resort has plans to open in late 2020 or early 2021. 
“This is a shakedown, pure and simple. The Paradise Valley Town Council is sorely mistaken if it thinks it can rip up our development agreement and squeeze us for millions of dollars in bogus fees and charges just so Town Hall can paper over its budget shortfall,” said Mr. Ayoub in a prepared statement. 
“The Palmeraie — including the Ritz-Carlton, Paradise Valley — will be an economic powerhouse and is the most ambitious luxury community ever built in Arizona, and we are committed to paying our fair share for infrastructure. But we will not bow to the financial coercion of town officials, nor will we allow them to jeopardize a project in which hundreds of millions of dollars have been invested, including from Arizona families who’ve already purchased residences as part of our property.” 
Town Manager Jill Keimach says Paradise Valley has acted in good faith and done nothing wrong in its negotiations with Five Star over any aspect of the 2016 development agreement. 
“While two parties can certainly have disagreements about the meaning of contract terms, it does bear mentioning that Five Star has insisted upon interpretations of the 2016 development agreement that would result in the public, via the town, bearing greater financial costs, while Five Star has also raised changing the agreed-upon timing for certificates of occupancy and rezoning parts of the project as part of a resolution of what the town sees as totally unrelated, relatively minor contract interpretation issues,” Keimach said. 
Keimach also noted that Five Star requested rezoning and other changes to the DA, without proper public input, transparency and adherence to the town’s required special use permit amendment process. 
The Ritz-Carlton and Palmeraie development is about a $2B investment, according to Five Star officials, while the drainage work in question is estimated to be about $2M. 
Five Star Development is represented by zoning law firm Berry Riddell’s Jeffrey D. Gross, while Patrick Irvine of Fennemore Craig is representing Paradise Valley. 
Read more at Independent Newsmedia. 

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