Anatomy of the deal: the redevelopment of Mountain Shadows in Paradise Valley

The scene in April 2013 when the deal was struck between Crown Realty and Development and Paradise Valley Town Council for the redevelopment of the Mountain Shadows Golf Resort now realized. Shaking hands are former Paradise Valley Mayor Scott LeMarr and Rick Carpinelli of Crown Realty. (File Photo)

As the resort that was Mountain Shadows becomes a distant memory and the resort that is Mountain Shadows begins to establish its own identity local dignitaries are beginning to come to see the vision that’s taken more than a decade to be realized.

The once proud Mountain Shadows Golf Resort in the heart of the Town of Paradise Valley historically at about 56th Street and Lincoln Drive was left in disarray as the resort was shuttered in summer 2004.

In the early 2000s, the redevelopment proposal was fraught with old records, a complex zoning entitlement process and the property was surrounded by two affluent communities filled with residents who were upset the resort was in disrepair and had an idea or two of how the new resort ought to unfold.

But amidst the complex redevelopment scenario and the subsequent life-engulfing municipal negotiation marathon destined to unfold was a document that made it all worthwhile: the 1992 development agreement that ultimately granted extensive density rights to whoever owned the property.

Turns out, Robert Flaxman, president and CEO of Crown Realty and Development, knew that all along.

“The town received notice in 2004 that Marriott was no longer interested in maintaining the property and it was damaging their brand. Mountain Shadows was owned by Marriott Corp., which also owned Camelback Inn at the same time it was annexed in 1992,” said Mr. Flaxman in an Aug. 8 phone interview.

“The only plan that they could come up with was to rip up the golf course and build houses. They took that to the town and they basically said, ‘over our dead body.’”

The next entity to bring another idea to the table was Crown Realty, but those plans were abandoned as the 2008 financial crisis was beginning to take heed on the real estate horizon.

“The history of our company is to focus on projects that require complex execution to achieve something of lasting value,” Mr. Flaxman said. “We had a boarded up resort from Labor Day 2004 until the hotel opened up earlier this year. You had vested rights that really convoluted the whole property.”

Paradise Valley Town Council unanimously approved a special-use permit April 18, 2013 to give Crown Realty & Development, then-owner of the entire property, the green light to begin revamp efforts.

Approval by Paradise Valley Town Council came just 24 hours prior to a deadline set by a disclosure statement filed March 2013 in United States Bankruptcy Court.

There was a time when the Mountain Shadows Golf Resort of years gone by was the premiere pool scene in the Phoenix metropolitan area. (Submitted photo)

Old deals spur new resort

In the summer of 2012 Mr. Flaxman publicly acknowledged the limited liability corporation that officially owned the Mountain Shadows Golf Resort, about 68 acres, was in default in payments for its loan of $32 million and the matter was headed to U.S. Bankruptcy Court.

Robert Flaxman

At the time, the note for the Mountain Shadows Golf Resort was held by U.S. Bank.

The previous bank that held the note — San Diego National Bank — failed in November 2010 and ownership was temporarily transferred to the Federal Deposit Insurance Corp.

By June 2011 a deal had been struck with U.S. Bank and the FDIC transferring assets from the San Diego National Bank, which included the $32 million Mountain Shadows deed, to U.S. Bank, Independent archives state.

The limited liability corp. that is operated by a board of investors helmed by Mr. Flaxman strategically decided to cease mortgage payments on the property in March 2010.

Through bankruptcy proceedings a true valuation for the land Mr. Flaxman controlled was realized as well as likely legal precedence set by the 1992 annexation documents.

Gerald Gordon of Gordon Silver Attorneys at Law said at the November 2013 filing of reorganization plans, the United States Bankruptcy Court filed an appraisal done on the resort property that valued the land at $59 million.

An appraisal conducted by U.S. Bank, the lien holder of the property, put a valuation of $28 million on the same parcel of land.

Despite vocal concerns, Crown Realty officials relentlessly contended the underlying issue of the proposed revitalization of the property hinged on two documents: the 1992 development agreement and a 1962 declaration of restrictions placed on attached residential property.

“It played a very big role and I have to hand it to the town leaders that negotiated with us because they really did so in earnest,” Mr. Flaxman said of the legal power old deals gave Crown Realty in terms of density rights.

“On the one hand, we had a development agreement that was an enforceable contract with the town. But I have to hand it to Scott LeMarr, Jim Bacon, Eva Cutro and Andrew Miller because we at times locked ourselves in with difficult negotiations and the end result we believe has been a win for everybody.”

At the end of the day, Mr. Flaxman says, litigation wasn’t in anyone’s best interests.

The first development agreement, which was done behind closed doors, was made to ensure the property of Mountain Shadows would be annexed within Paradise Valley town limits in 1992, records show.

On file with then Maricopa County Recorder’s Office was a development agreement between the Town of Paradise Valley and Potomac Hotel Limited Partnership, the owner at the time, specifying what rules of development the property known as Mountain Shadows would adhere to.

The document — signed by then-mayor Kent D. Wick and attested to by former Town Clerk Lenore P. Lancaster — superseded any kind of special-use permit or process the town might want to impose on Crown Realty.

A Breathtaking view of the executive course at the newly redesigned Mountain Shadows resort. (Submitted photo)

A juggling act

The land-use plan unfolding today at the Mountain Shadows resort is one of 50 iterations, according to Crown Realty Senior Vice President of Acquisition and Development Rick Carpinelli.

Rick Carpinelli

“The site and location is world-class,” he said in an Aug. 8 phone interview. “We must have gone through 50 to 100 iterations of the land plan until we finally settled with what you are seeing today.”

While grandiose redevelopment ideas were swirling at Crown Realty during the time of negotiations then-Mayor Scott LeMarr remembers that period of time in a different light.

“It was very complex. There was some tensions between HOAs and town government,” he said in an Aug. 8 phone interview.

“So many times the greater community is in favor of something more than the neighbors. Even within our council and our consultants didn’t all agree about what the town’s potential liability was with Crown. I happen to think it was substantial.”

Mr. Carpinelli served largely, from the outside looking in, as the consigliere between both HOA factions, town government and Mr. Flaxman.

“By being a resident of the town it allowed me to show the community that I had a stake in the outcome,” Mr. Carpinelli said. “I had empathy for their thoughts and feelings, so that even at the points in time when not all parties necessarily agreed on the direction of the project at least they were provided accurate information.”

Mr. Carpinelli says he is proud to have played a role in the rebirth of the Mountain Shadows resort.

“There are projects that leave a legacy and a reputation for a company and for personal individuals — and I got to be a part of that,” he said. “It is certainly a source of pride for myself and something that I will reflect on with my son to show him what his father was apart of.”

A willingness to contribute

While the community aspects of bringing a sustainable resort property back to the heart of Paradise Valley was beginning to emerge in late 2014 and early 2015, Mr. Flaxman illustrates a willingness-to-contribute scenario that helped surrounding homeowners sign off on development agreements of their own years earlier.

A classic photograph of what the Mountain Shadows Golf Resort looked like at its peak in the 1970s. (Submitted photo)

“One of the key aspects of our decision to choose to locate the hotel on the west side allowed us to get buy-in from Mountain Shadows West and that was also gained, quite frankly, by a willingness to contribute to HOAs on both the east and west sides,” he said.

Investments to the tune of $750,000 were provided to both HOAs to form each sides’ guardhouse that helped gained 117 of the 118 surrounding homeowners to sign off on consent agreements, Crown officials say.

The giving didn’t stop there, Independent records show.

Amongst bed tax remits, permit fees and development agreement tariffs, Crown Realty contributed $1.6 million to the redevelopment of 56th Street.

Then-Paradise Valley Town Manager Jim Bacon says he believes the best deal was struck between developer interests and community needs.

“We believed the project was fair to both the town and Crown Development,” he said in an Aug. 9 statement.

“Most importantly, we believed the agreement would result in actual development of the property. That proved to be true so I see the agreement reflecting the best deal for both the town and Crown.”

Mr. Bacon says he was merely a cog in the wheel of municipal development as the Mountain Shadows project passed through his tenure at the Town of Paradise Valley.

“The story of Mountain Shadows began before I joined the Paradise Valley town staff and continued after my departure so there’s no story to tell,” he said. “The mayor, council members, Crown Development representatives, and town staff were all committed, talented people that did great work on this important project. I was fortunate to be part of it.”

From left are Pete Corpstein of Westroc Hospitality; Bill Nassikas of Westroc Hospitality; Scott Lyon, CEO of Westroc Hospitality; Paradise Valley Mayor Michael Collins; Dupree Scovell of Woodbine Development; Kristopher Harman of Woodbine Development; and Mark Philp of Allen and Philp Architecture at the Dec. 2 Mountain Shadows resort groundbreaking in Paradise Valley. (File photo)

Mountain Shadows today

In late 2014, a subsidiary of Scottsdale-based Cullum Homes purchased the 40 residential lots — just over 9,500 square feet with a value of $575,000 per lot. The new homes are now known as The Village at Mountain Shadows.

Kim and Rod Cullum

In early 2015 a $10.5 million deal was struck between Westroc Hospitality, Woodbine Development Corp. and Crown Realty & Development for the creation of a $65 million luxury resort and 18-hole golf course standing today.

“We have had our eye on this incredible site for over a dozen years,” said Scott Lyon, CEO of Westroc Hospitality, in an Aug. 9 statement.

“We targeted Mountain Shadows once we heard that Marriott intended to sell the property shortly after closing in 2004. Crown beat us out on the sale and we have been in discussions on the property ever since, including through several failed attempts with other suitors as well as several failed attempts to secure zoning for the property.”

On Saturday, April 1, 2017 Westroc Hospitality opened the doors to a redefined Mountain Shadows.
A partnership between Westroc Hospitality and Woodbine Development Corp. has spurred the creation of a luxury resort and 18-hole golf course at 5545 E. Lincoln Drive in the Town of Paradise Valley.

What has been created is a full-service boutique resort featuring 183 guest rooms in a two-building complex, an adjacent luxury suite and loft wing containing 42 units, and a corner restaurant offering.

The Mountain Shadows resort has been completely redesigned as part of the project.

Scottsdale-based Westroc operates Hotel Valley Ho and Sanctuary on Camelback, while the Dallas-based Woodbine Corp. is responsible for multi-use development at The Westin Kierland Resort and Spa, among a host of other properties.

While the consultation is happening on the ground level the aesthetic of the resort has been hatched by New York-based MARKZEFF interior designs.

The resort has received a AAA Four Diamond Rating, Vogue listed it as one of the “Best New Hotel Pools in America, and The Short Course was honored as the Renovation of the Year for a public course by Golf Inc. magazine

Mr. Lyon says without the overall vision for the site and the complex answers found to convoluted questions the resort product would not exist today and it’s that foresight he believes is a testament to the precise planning of Crown Realty.

“Robert did a masterful job of orchestrating a plan that delivered the resort that the town wanted, and preserved the golf course for the community,” he said of working with Crown Realty.

“I enjoyed working with Robert, he is incredibly skilled at what he does. We are so grateful that he brought us in to the redevelopment of the resort, which sat vacant for way too long. We hope the new resort will become the social crossroads of the town.”

A transformed Mountain Shadows resort now realized. (File photo)

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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