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Hospitality Lawyer: Coachella Valley Development in
Focus - Fastest Growing Area in Southern California
By Jim Butler, Hotel Lawyer, Author of www.HotelLawBlog.com
November 2006

Hotel Lawyer: Coachella Valley. Just before Thanksgiving, more than 250 people listened to the experts at the ULI-JMBM Conference on development issues and trends affecting the fastest growing area in Southern California—the Coachella Valley. According to David Waite, a land use and entitlements partner in JMBM’s Global Hospitality Group and the moderator for the program, “The Coachella Valley extends approximately 45 miles from Palm Springs to the Salton Sea. It includes nine cites: Cathedral City, Coachella, Desert Hot Springs, Indian Wells, Indio, La Quinta, Palm Desert, Palm Springs and Rancho Mirage.”

Here is why you might want to know what is going on in this development center!

Key Facts and overview

Naturally, David Waite’s land use and entitlement practice with JMBM and the Global Hospitality Group has a deep involvement in the Coachella Valley in many hotel-enhanced mixed-use projects. Many involve golf, destination spas, residential and condo hotel, retail, and other real estate uses. According to David, there are a number of Key Facts to understanding the opportunities, and problems, in this hot market:

  • The Coachella Valley has grown at a rate of 59% from 1990-2004. This is the fastest growing region in Southern California—even faster than Riverside!
  • The Coachella Valley current population is expected to grow from its present 400,000 to more than 600,000 by 2020 and top 1,000,000 by 2050.
  • The current median home price of $370,000 is well under Los Angeles at $564,000, San Diego at $616,000, and Orange County at $716,000. This gives the Coachella Valley a strong competitive advantage over neighboring regions in terms of housing costs, and it will continue for the foreseeable future.
  • The region will not only continue to be a resort destination with more than 100 golf courses and many destination luxury hotels, but, increasingly, it will also house a new and emerging middle class that will support the transportation and shipping logistics (rail, truck and air) that will emerge from the Ports of Long Beach, LA, San Diego and Mexico. The Coachella Valley and the Imperial Valley will be the gateway to the inland ports of southern California that are the goods distributions centers of the nation.
  • By 2020, more than 200,000 new residents will move to the Coachella Valley. That equates to 75,000 new households and more than 5,000 new homes, annually. Additional schools and retail will accompany this growth.
  • Of more than 1.2 million acres of undeveloped land in the valley, developers estimate only about 180,000 will be used, with more than half preserved for open space.
  • With more than 100 endangered species in the area—the highest number in any region under the Endangered Species Act— there are many environmental issues that could impact the pace of development.
What does this all mean to a developer?

According to Waite, “The upshot of all of this is that over the near and long term, there will be a scarcity of developable land, and the same development pressures and constraints that have defined neighboring Los Angeles and Orange County will increasingly define the scope of development in the Coachella Valley. This in turn will contribute to a rise in land values as entitlements become more difficult to obtain.”
And as David says, with an exotic desert location, international airport and market, movie star history, and strong demographics, this will be a very high priority on many developers’ lists—at an international level. David also points out that the rapidly rising development costs can be managed with knowledgeable local counsel who have been through the traps and know the issues so there are fewer surprises. That’s what he does for his clients working in this mega market.

Biggest issues? 

They vary. Water rights. Traffic. Endangered species. Preserving transient occupancy taxes and providing hotel rooms for tourists (who spend more per capita than residents). These are all high on the agenda of local officials according to David Waite.
According to David , there is an emerging environmental agenda in the Coachella Valley that increasingly will conflict with the best laid plans of the development community. Understanding how to manage these new development constraints during the entitlements process in a way that does not adversely impact a project or a development schedule is the key to success.

David counsels that in his experience, 90% of the entitlement issues can be identified up front by performing a thorough entitlements evaluation at the inception of the project. Although there is always some uncertainty in the discretionary approval process, there should be no big surprises if the developer has done its homework early in the development process. Armed with the right information, the project can be shaped and presented to the community in a way that it gains the support of the local elected officials, regulatory agencies and other stakeholders. Obtaining land use entitlements involves a balancing of public and private goals and objectives; the key to striking a successful balance is knowing how to seize the fulcrum of community and regulatory support for the project. 



David Waite is a senior member of the Global Hospitality Group® and a partner in the Firm's Government, Land Use, Environmental and Energy Department. A land use and environmental lawyer with more than 20 years' experience, David specializes in representing hospitality industry clients in all aspects of land use entitlements, regulatory permits and approvals for hotels, destination resorts, mixed use development and master-planned communities. David's expertise includes zoning, subdivisions, variances, development agreements, impact fees, initiatives and referenda, CEQA/NEPA, wetlands, endangered species, redevelopment law, land use litigation, hazardous materials compliance and remediation. For more information please contact David Waite at 310.7785.5319 or DWaite@JMBM.com.

About the Author:

Jim Butler is recognized as one of the top hotel lawyers in the world.  He devotes 100% of his practice to hospitality, representing hotel owners, developers and lenders.  Jim leads JMBM’s Global Hospitality Group®—a team of 50 seasoned professionals with more than $40 billion of hotel transactional experience, involving more than 1,000 properties located around the globe.  In the last 5 years alone, they have brought their practical advice to more than 80 “hotel-enhanced mixed-use” projects, a term Jim coined to fill a void in industry lexicon.  This term describes one of the hottest developments in real estate-where hotels work together with shopping center, residential, office, retail, spa and sports facility components to mutually enhance the entire project’s excitement and success. Jim and his team are more than “just” great hotel lawyers.  They are also hospitality consultants and business advisors.  They are deal makers.  They can help find the right operator or capital provider. They know who to call and how to reach them. They are a major gateway of hotel finance, facilitating the flow of capital with their legal skill, hospitality industry knowledge and ability to find the right “fit” for all parts of the capital stack.  Because they are part of the very fabric of the hotel industry, they are able to help clients identify key business goals, assemble the right team, strategize the approach to optimize value and then get the deal done.  Jim is the author of the Hotel Law Blog, www.HotelLawBlog.com.  He can be reached at +1 310.201.3526 or jbutler@jmbm.com.

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Contact:

Jim Butler
Chairman, Global Hospitality Group
Jeffer, Mangels, Butler & Marmaro LLP
1900 Avenue of the Stars, 7th Floor
Los Angeles, CA 90067-4308
(310) 201-3526 direct
jbutler@jmbm.com
www.HotelLawBlog.com
 

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Also See: The Coachella Valley Has More than 100 Golf Courses; Everyone's Trying to Up the Ante / November 2004
Sandwiched Between Palm Springs and Rancho Mirage, Cathedral City Hoping the Planned 300-room Sheraton Desert Cove Resort Will Make the City more of a Destination / May 2005


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