After nearly a year of litigation, the town of Paradise Valley and the developer of a $2 billion real estate project have reached a settlement agreement.
The dispute was over whether Five Star Development, which is building The Palmeraie luxury community and The Ritz-Carlton Paradise Valley, The Palmeraie, was responsible for paying for underground storm drainage structures in public streets and some other payments the town has asked Five Star to pay.
When lawsuits were initially filed last June, Five Star’s owners alleged the town’s ask for funding was a “shakedown,” while Paradise Valley officials said the developer was trying to “create leverage” to negotiate rezoning issues.
It appears cooler heads have prevailed as the two sides announced the agreement on June 11.
“We are pleased to collaborate with the town of Paradise Valley under Mayor Jerry Bien-Willner’s leadership in order to put this issue behind us and move forward with a renewed sense of alignment as we near the opening of the first phase of The Palmeraie, a cornerstone of our $2 billion development, in 2022,” Jerry Ayoub, president of Five Star Development, said in a statement.
Mayor Bien-Willner issued a similar peacemaking statement.
“Throughout this process, as with all approved private development projects in the town, the town’s goal has been to honor its commitments while rooting for the successful completion of the project,” Bien-Willner said in a statement. “We’re pleased that the town and Five Star could collaboratively and amicably work through our outstanding issues.”
The Palmeraie is a 122-acre master-planned community that will feature Ritz-Carlton resort, 81 Ritz-Carlton Residences Villas, 39 single-family Ritz-Carlton Residences Estate Homes, and a shopping, dining and office district. The resort is being constructed on the west side of Scottsdale Road between Lincoln Drive and Indian Bend Road.
The provisions of the settlement agreement include that Five Star’s and Paradise Valley’s obligations in the original 2016 development pact will be retained. Both sides said they resolved the outstanding costs of the infrastructure projects and the litigation over the storm drains.
Between this litigation, the Covid-19 pandemic and issues with its general contractor, The Palmeraie project has been delayed a number of times. The first phase, which will be the Ritz-Carlton Paradise Valley, The Palmeraie, was at one time expected to be completed by the end of 2020, is now expected to open in late 2022.
During the first half of this year, millions of dollars’ worth of mechanics liens were filed on the project from its former general contractor, Layton Construction, as well as many subcontractors, according to Maricopa County records.
Richard Frazee, the director of construction at Five Star Development, told the Business Journal that it is common to have a large number of mechanics liens filed against a project of this magnitude. He said they were mostly filed because Five Star transitioned from one general contractor to a new one, not because of the litigation surrounding the project.
“Five Star has been paying both its general contractor and the subs for years and in the last few months has reconciled nearly all of the outstanding payments,” Frazee said. “As of early June, most of the original sub-contractors are on the job working toward completion of the project.”
In the fall of 2020 Five Star brought on PWI Construction to work on residential portion of the project. Five Star itself has taken over leadership of the resort portion and is trying to make up for lost time.
The Business Journal visited the Ritz-Carlton campus in the summer of 2020 for a construction tour in the gallery below.