(Source: ParadiseValleyIndependent): Terrance Thornton – 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.
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.
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.