La Quinta's Talus development faces new deadlines to secure financing. Here are the details
The developer of a long-delayed luxury resort in La Quinta known as Talus is facing new deadlines from the city to secure the project’s financing and complete its development, with a timeline approved by the council Tuesday calling for the first hotel by March 2025.
Talus is slated to include a Montage hotel and a Pendry hotel, as well as 29 single-family homes and 55 condominiums from the same luxury brands that will be used as short-term rentals. A golf clubhouse, a large conference center and a luxury spa are also planned for the 525-acre project site.
The project, which is expected to cost around $600 million upon its completion, has been in the works for several years. The foothills area just south of 52nd Avenue in La Quinta was eyed by city officials for a large-scale development, previously known as SilverRock, since at least 2002.
But while one golf course opened there in 2005, further plans were derailed by economic troubles during the Great Recession and, more recently, the COVID-19 pandemic. Coming out of the pandemic, lead developer Robert Green has engaged with several new lenders to refinance much of the project.
While some of those loans are still being finalized, an amended development agreement approved by the council Tuesday offers a new timeframe for the project, requiring Green to finish construction of the Montage luxury hotel, as well as the conference center, by March 2025.
The development agreement between the city and Green — which has now been amended five times since its approval in 2014 — also calls for the Pendry lifestyle hotel to be built by the end of 2026, while the project’s golf clubhouse and practice range must be done by November 2024.
The amendment approved Tuesday also requires Green to close escrow on the new loans by the start of 2024, with a clause allowing him to extend that deadline to the end of June if he shows good-faith efforts toward closing the deals. (The other deadlines in the amended agreement could also be pushed back slightly if the six-month extension is needed.)
Originally estimated to cost in the $400 million range, the price tag for Talus has gradually ticked up due to inflationary costs for labor, equipment and building materials, as well as higher interest rates.
While city officials have been frustrated by the project's delays, the council largely struck a collaborative tone during Tuesday's meeting, agreeing that the latest amendment was the best route forward to completing the development.
Where the project formerly known as SilverRock stands
While some of the standalone Montage-branded homes have arisen at the site, construction has slowed significantly until the additional funding locks in, with work on most of the buildings paused since late last year.
Green’s company is aiming to secure the remaining funds needed for the project — more than $250 million — from two large lenders: Lieef Real Estate Energy Partners and Ziegler. If finalized, the Lieef loan of about $170 million would come through C-PACE, a long-term financing program that incentivizes energy-efficient development, while the Ziegler deal would include about $95 million in bonds.
The Ziegler loan needs to be finalized in order for the Lieef loan to close, and officials from Ziegler are currently working with Standard and Poor’s on the bond ratings necessary to close the deal. Green told the council Tuesday that he was just in New York for two weeks working to finalize the ratings.
Some funding has already locked in, as the project secured $48 million in construction loans to start building the first round of Montage residences late last year. Another $108 million is coming through a federal program that promotes foreign investment in U.S. developments.
Due to the delays in getting the bond ratings needed for the largest loans, the project will also include a couple of “bridge loans,” including one worth up to $25 million from Keillor Capital that closed last week. Green also highlighted a $79 million loan from Silver Arch Capital that his company is aiming to finalize by the end of this month.
Green also noted Montage International, which oversees both Montage and Pendry projects, is committed to the project, reiterating a joint statement issued by La Quinta’s city manager and the Montage International COO last month. He also noted the luxury hotel brands “long ago” signed agreements to manage the resort.
The amended agreement also lays out penalties if the project’s completion dates aren’t met, effectively raising the purchase price for nearby land that could be added on to Talus in the future. Green is already subject to $2 million in such penalties from missing previous milestones. The amendment also reduces the rebates on transient occupancy tax receipts available to Green under the long-term agreement.
Talus could eventually bring millions in new revenue to the city, along with $7 million in developer impact fees while the project is developed, according to financial estimates included in a city staff report to the council. For example, 10 years out, the project is expected to generate roughly $2 million annually in lodging taxes.
The report also notes the project is expected to create an estimated 1,750 temporary construction jobs, along with 465 full-time jobs at the resort.
What the developer, city officials said
While more steps remain for major construction to proceed, city officials were supportive of the proposed amendment to keep things on track.
“The city attorney and I have obviously been working for a very long time to bring this amendment forward, and the fact that it is here before you tonight hopefully is a sign that a lot of these loans are going to start closing,” City Manager Jon McMillen told the council.
Mayor Linda Evans noted that even once the primary loans for Talus are closed, it will take roughly 90 more days to redeploy contractors and get large-scale construction going again at the site.
“It's easy to say there's nothing happening, because people will drive by and they're not seeing workers out there, when behind the scenes, we're talking about millions and millions and millions of dollars to secure (and) to start that momentum,” Evans said.
In response to a question from Councilmember John Peña, Green cited several dynamics — rising U.S. interest rates, skyrocketing construction costs and renewed interest in international travel — that have impacted Talus, along with other projects his company is developing.
“Every other week, it seems like we're having to renegotiate terms with these lenders, so it's a struggle, but if you look at the 25-year history of the Robert Green Company, this is not the first time we've been through this, and every time we've been able to figure out how to get it done,” Green said.
“We'll get through this, and we really thank the council for their foresight in saying, ‘Let's not fight Robert, let's help him get it done,’” he added.
Tom Coulter covers the cities of Palm Desert, La Quinta, Rancho Mirage and Indian Wells. Reach him at thomas.coulter@desertsun.com.
This article originally appeared on Palm Springs Desert Sun: La Quinta's Talus luxury resort faces new financing deadlines
