2005 06 15 RDAe4 4 4 adja
Redevelopment Agency Agendas are
Available on the City's Web Page
@ www.la-quinta.org
REDEVELOPMENT AGENCY
AGENDA
CITY COUNCIL CHAMBERS
78-495 Calle Tampico
La Quinta, California 92253
SPECIAL Meeting
June 15, 2005 — 7:00 PM
Beginning Resolution No. RA 2005-007
CALL TO ORDER
Roll Call:
Agency Board Members: Adolph, Henderson, Perkins, Sniff, and Chairman Osborne
PUBLIC COMMENT
At this time, members of the public may address the Redevelopment Agency on any
matter not listed on the agenda. Please complete a "request to speak" form and limit your
comments to three minutes. Please watch the timing device on the podium.
For all Agency Business Session matters or Public Hearings on the agenda, a completed
"request to speak" form should be filed with the City Clerk prior to the Agency beginning
consideration of that item.
STUDY SESSION
1. DISCUSSION REGARDING DEVELOPMENT CONCEPTS PURSUANT TO THE
EXCLUSIVE NEGOTIATION AGREEMENT BY AND BETWEEN THE LA QUINTA
REDEVELOPMENT AGENCY AND DDC DESERT DEVELOPMENT, INC., FOR
DEVELOPABLE PARCELS WITHIN SilverRock RESORT.
Redevelopment Agency Agenda 1 June 15, 2005
Special Meeting
CHAIR AND BOARD MEMBERS' ITEMS — NONE
ADJOURNMENT
Adjourn to a special meeting to be held at 4:00 p.m. on June 20, 2005 and a regularly
scheduled meeting of the Redevelopment Agency to be held on June 21, 2005
commencing with closed session at 2:00 p.m. and open session at 3:00 p.m. in the City
Council Chambers, 78-495 Calle Tampico, La Quinta, CA 92253.
DECLARATION OF POSTING
I, June S. Greek, City Clerk of the City of La Quinta, do hereby declare that the foregoing
agenda for the La Quinta Redevelopment Agency meeting of June 15, 2005, was posted
on the outside entry to the Council Chamber at 78-495 Calle Tampico and on the bulletin
boards at 51-321 Avenida Bermudas and 78-630 Highway 111, on Friday, June 10, 2005.
DATED: June 10, 2005
Ep�� '-d . '-,
JUNE S. GREEK, CIVIC, City Clerk
City of La Quinta, California
Redevelopment Agency Agenda 2 June 15, 2005
Special Meeting
COUNCIL/RDA MEETING DATE: June 15, 2005
ITEM TITLE: Discussion of Development Concepts
Pursuant to the Exclusive Negotiation Agreement By
and Between the La Quinta Redevelopment Agency
and DDC Desert Development, Inc., for Developable
Parcels Within SilverRock Resort
RECOMMENDATION:
AGENDA CATEGORY:
BUSINESS SESSION:
CONSENT CALENDAR:
STUDY SESSION:
PUBLIC HEARING:
That the Agency Board discuss development concepts for SilverRock Resort.
FISCAL IMPLICATIONS:
None directly associated with this Study Session item. SilverRock Resort has been
conceived as a world -class destination resort that will produce recurring revenue to the
City's General Fund. Concepts considered will have future cost implications that may
be identified and refined with specific development proposals.
BACKGROUND AND OVERVIEW:
The La Quinta Redevelopment Agency entered into an Exclusive Negotiating
Agreement (ENA) with DDC Desert Development, Inc., in March 2005 for purposes of
pursuing development options within SilverRock Resort. The ENA is for a period of up
to 180 days, the first 90 days of which (i.e., the "First Due Diligence Period") provides
for site planning and due diligence activities. Included within these planning activities
are a minimum of two public workshops with the Agency. The ENA anticipates that
DDC will submit site plans for Agency consideration and approval at the end of the
First Due Diligence Period (i.e., by June 30, 2005).
The Agency held the first of the aforementioned public workshops, the "idea session,"
on April 20, 2005. A second public workshop was held May 18, 2005.
This report transmits additional site plan and development program concepts for
SilverRock Resort. These concepts build upon the input the Agency Board provided at
the May 18, 2005 meeting, and are to serve as the platform for on -going discussions
regarding the costs and revenues associated with building a variety of resort and retail
uses at SilverRock Resort. In order to identify the financial commitments DDC Desert
Development and the La Quinta Redevelopment Agency must consider when
implementing the desired development program, we must first identify what we want
to build and how the buildings will look and feel. These decisions will then drive the
cost parameters of the overall development program and will guide the structure of the
Agency's land sale or lease options. The input staff and DDC will receive during the
Study Session will then be refined into a final development concept and cost schedule
that will be reviewed with the Agency Board at the July 19, 2005 Study Session.
Development Program Cost and Agency Investment
During the May 18 Study Session, questions surfaced regarding "what it will cost the
Agency" to have DDC building the scale and quality level associated with the
development program they are seeking. Staff has reviewed this issue with Mr. Lennon
and Mr. Cullinan and surfaced the following:
Condo -Hotel Product. Since 2001, hotel and resort developers have increasingly
turned to financing new hotel and resort hotel developments through incorporating
condominium units in their hotel/resort projects, and raising equity through the sale of
the condominium units to individual investor owners. Incentives are then offered to
the condominium unit owners to include their units in the hotel rental pool. Prior to
2001, hotel development funding was viewed by the capital and equity markets as
risky ventures; hotel proposals were often the last ventures that real estate investors
sought when the economy was good, and the first investment that investors moved
away from when the economy started to decline. The risks entailed building a facility
that offered sufficient, quality room inventory and amenities in hopes that there will be
a more than adequate supply of patrons willing to rent a room on a nightly basis.
September 11, 2001 changed the hotel/resort equity markets; what was already
viewed as a high risk investment became even greater risk investment due to the
acute decline in hotel/resort occupancy.
Investor interest in underwriting hotel/resort development has increased since 2001
given the improving performance of hotel companies, the recent appeal of investing in
real estate over the stock market, and the increasing desire of baby boomers to secure
a second home investment in resort communities. However, equity investors and
institutional lenders seek minimum returns of 20 percent or more on their hotel/resort
investments, compared to 12 to 15 percent returns for typical residential, commercial
and office property investments. In addition, hotel developers must often fund about
40 percent of the required equity in order to attract investor and institutional lender
investment.
In order to generate equity to underwrite their SilverRock hotel/resort development
proposals, DDC is proposing to use the condo -hotel equity model by including condo -
hotel units in the overall development program. In reviewing the Coachella Valley
condo -hotel market, there are a variety of new and proposed developments coming on-
line that will directly compete with SilverRock. Given SilverRock's unique mountain
setting, its location adjacent to some of La Quinta's more upscale communities, and
the need to make a strong, lasting impression that will set the tone for the rest of
SilverRock, DDC believes that the market will require a higher quality boutique/condo-
hotel as the first development in order to set SilverRock apart from competing
products. This contention was supported by the Agency's hospitality consultant, PKF,
when RSG reviewed this question with them. Further, staff's initial analysis indicates 2
that the higher quality amenities DDC is proposing would be funded through the sales
and hotel room income and not through Agency investment.
Agency Participation/Investment
The prior discussion should not imply that the Agency will not have to invest in the
SilverRock development. The required Agency investment will in all likelihood not
involve funding quality level upgrades, but instead investing in improvements that do
not generate revenue, or sufficient revenue, to cover their associated development
costs. While we are in the preliminary stage of costing and running development and
operations pro formas, staff's initial discussions with DDC have surfaced the following
potential areas that may require Agency investment:
Entry Way/Golf Course Enhancements. In order to reflect a high quality resort
experience, DDC may request that the Agency fund additional landscaping and site
upgrade improvements to the Tournament Course and internal roadway parkways and
medians that serve SilverRock to create a better "arrival scene." This could entail a
direct Agency cash investment in such improvements. Further, DDC has indicated
that they would desire to have the permanent club house constructed concurrently
with the development of the Phase 1 boutique hotel, and the second golf course
constructed concurrently with the main feature hotel.
Parking Structures. DDC has indicated a desire to utilize parking garages or structures.
This would allow additional land area to be developed with revenue generating hotel
and commercial uses, and would reduce the need to create vast expanses of surface
parking lots throughout the development. Surface parking spaces typically cost
$ 5,000 per space (not including land) to develop; structured parking spaces typically
cost $20,000 to $25,000 per space (not including land) to develop. The Coachella
Valley market does not support charging for parking so if parking structures are used,
their cost must be borne by the overall development.
Our initial discussions indicate that this Agency investment could be accomplished by
reducing the cost of the land sale or lease rates to a less than fair market value rather
than having the Agency provide direct cash investment. Staff is reviewing this with
Agency legal counsel to explore how a land sale or lease transaction could be
structured while dealing with potential prevailing wage impacts. One approach may
entail having DDC pay the fair reuse value versus the fair market value. The reuse
value would be based upon a land value established once the cost impacts imposed by
requiring structured parking are factored into the development and operations pro
formas.
We do not have the costs and revenues fully identified at this time. Once we
complete the next review of the concepts for the various phases of the development
program, staff and DDC will then endeavor to identify the costs and revenues
associated with each development concept, and the anticipated level of Agency
assistance, if any, needed to achieve each concept.
The following attachments are provided to further discussion on SilverRock planning
3
and development concepts:
1. SilverRock agenda
2. Glossary of terms
3. Draft for financial discussion
4. Preliminary financial spread sheet with map
5. Architecture and design -theoretic concept
6. L.A. Times article regarding hybrid hotels.
Respectfully submitted,
Mark Weiss
Assistant Executive Director
Approved for submission by:
Thomas P. Genovese, Executive Director
2
ATTACHMENT 1
S ilverRock
Agenda
June 15, 2005
I. Financial Discussion
II. Master and Thematic Plans
III. Updated Boutique Hotel Plan
5
ATTACHMENT 2
SilverRock
Glossary of Terms
Key A separately locked room, suite or equivalent space in a hotel or resort
casita available for rent on a nightly basis.
Boutique Hotel An intimate, small hotel (30-100+ rooms) with a high level of personal
service usually with a unique architectural theme. Examples: Bel Air
Hotel, Los Angeles; The Boulders Carefree, Arizona; Royal Palms,
Phoenix, Arizona.
Resort Casita An investor owned condominium with one or more rental key
opportunities and generating TOT and/or TOT equivalent revenue.
Feature Hotel A fully amenitized 4 star facility of 250+rooms and suites that combines a
hotel component with a Resort Casita component in a 3-5 story building.
Residence Club A timeshare (generally sold by the week or more), fractional ownership
(generally sold in increment's of 1/3 to 1/12 shares), or Club Membership
sold to individuals with a rental program available, generating TOT or
TOT equivalent.
Conference Center Space used primarily for meetings and trade shows to generate group
business to the Feature Hotel and Resort Casitas.
Space used primarily for Civic functions and meetings that may also
Community Center include a performing arts component.
Golf Performance A structure of up to 5000 square feet, located adjacent to the practice
Center facility that incorporates physical training and nutrition into a golf
improvement program.
Guest Any resort visitor, including tourists, conference attendees and local
residents.
5 Star An elite group of hotels with the ultimate in luxury and sophistication.
The establishment provides consistently superlative service in an
exceptionally distinctive luxury environment with expanded services.
Attention to detail is evident throughout from the bed linens to staff
uniforms.
4 Star A superior property with high degree of service and amenities. The
establishment provides a luxury experience with expanded amenities in a
distinctive environment. Services may include, but are not limited to:
automatic turndown service, 24 hour room service, and valet parking.
3 Star A hotel/resort which is well-appointed, with a full -service restaurant and
expanded amenities, such as, but not limited to: fitness center, golf
course, tennis courts, 24 hour room service, and optional turndown
service.
SilverRock
Draft for Financial Discussion ATTACHMENT 3
with La Quinta RDA on June 15, 2005
Developer Assumptions
Boutique Hotel/Resort Casitas
a.
Cost to construct boutique hotel to be paid for by developer.
b.
City to provide all infrastructure including roads/bridges to
finished pad.
c.
Parking structure will require City participation in the form of
credit against land price.
d.
Land allocated to Resort Casitas to be paid as a per cent of
sales of resort casitas. Land allocated to hotel portion to be at
no cost to developer.
e.
City completes permanent golf clubhouse by opening of
boutique hotel.
• Feature Hotel — (assume 1 /3 resort casitas; 2/3 hotel rooms)
a.
Cost to construct main hotel to be paid by developer.
b.
City to provide all infrastructure including roads/bridges to
finished pad.
c.
Parking structure above or below ground will require City
participation
d.
Land allocated to resort casitas to be paid as a per cent of sales
of resort casitas. Land allocated to hotel portion to be at no
cost to developer.
e.
City completes 2"d golf course and Jefferson entry by hotel
opening.
f.
City completes majority of conference facilities by hotel
opening
Retail/Mixed Use
a. Cost to construct to be paid by developer
b. City to provide all infrastructure including roads/bridges to
finished pad.
c. Parking structure above or below ground may require financial
assistance from City.
d. Land to be leased or purchased at negotiable terms.
e. Cost of community amenities to be determined.
Conference Center/Community Center
a. Cost to construct and operate to be determined based on final
allocation of space.
b. City to provide all infrastructure including roads/bridges to
finished pad.
c. Parking structure above or below ground may require financial
assistance from City.
d. Land to be at no cost
e. Management of conference center to be under the control of
Feature Hotel Management.
7
SilverRock
Financial Spread Sheet
1B Ranch House
2A Feature Hotel
Hotel
Resort Casitas
Parkin
2B Conference Center
Community Center
Desert Golf Museum
Performina Arts Center
2C
Resort Retail/Mixed Use
Parkin _
6
Practice Facility
Golf Performance Facili
7
2nd Golf Course
:111
3
Resort Casitas
Parkin
2D Resort Casitas/Other
Parkinq
4 Resort Casitas/Other
Parking
PHASE VI
8 1 Civic Park/Parkina/Other
ATTACHMENT 4
ATTACHMENT 5
619105
5ilverKock Resort
Architecture & Design Thematic Concept
T
he architecture and design envisioned forjilverRock Resort Promises a character
as unique as e ProP y thert itself, taking advantage of the wonderful lake and golf
course settings �
that have alread been created. The thematic concept is tailored
specifically for S ilverR ock Resort; deferential to the dominant intrinsic attributes of
the land and
its herita e, 6ut at the same time infused with sophisticated details which
bridge t he natural and historical elements of the site with the 21 St century and the
outside world.
La QUinta residents and visitors (collectively "Guests") will 6e attracted to
,
`jilverRock Resort for the following reasons:
,) The Coachella Valley environment and its reputation as a world-renowned
destination
2 he location and quality of the golf and resort community of �a Quinta
)T
3) The property's natural uniqueness and beauty
Te q y anreputation hualit d of the golf course, future home of the 506
4)
Hope Chrysler Classic
5) Wo
rld class services and amenities, complemented 6y the availability of
artistic and cultural outlets, such as art exhibits, theatrical productions and
musical performances
flow a
6) nexi6le and organic land planning which promotes an open
s ner-g istic relationship among the various components of the resort
y
he uni ue and timeIess environment created 6y 5ilver R
ock esort's
7) T q
architecture, landscape architecture and interior design features.
P
Quests
who experience jilverRock will want to return not only for the quality of its
amenities, services and natural beauty, but also because of the enrichment and sense
i cover created and er etuated by the architecture. This is possible because
of d s y P P
10
the thoughtful and subtle infusion of a variety of design details from far-reaching
Places into the architectural foundation Promotes learning and expanding one's glo6al
Perspective, in addition to Providing a world -class resort experience. With this,
5ilverKock Resort, and 6y extension the City of La Quinta, will maintain its
relationship with the site's history, and at the same time 6e catapulted into a more
glo6al realm.
The thematic concept for the architecture at 5ilverKocL can generally 6e articulated
in five priority component areas of development, as follows:
1. 5tc is/ckaractcr
v
The architectural style and character will possess Spanish, Early California
Colonial and Native American elements, authentically rooted in the history of the
site. This architectural foundation will provide a window to a period when life was at a
slower pace, more peaceful, more tranquil, invoicing a sense of "I got away from it all."
At the same time, eclectic accents and sophisticated design details borrowed from the
world's other desert cultures will expand the experiential horizons of 5ilverKocL,5
guests, and e5ta6lish a 6roader sense of place. These accents and design details
reveal themselves as the guest experience deepens, such that a visit to 5ilverKOCL
6ecomes an enlightening process of discovery.
The physical architecture will flow so that varieties of space and form are created; the
6uilding5 will 6e tied together 6y intimate spaces for shade, water features, art
sculptures and gardens. The structures will incorporate a variety of doors, window
boxes and tiles, which enhance the visual experience and expand the architectural
influences. Loggias, patios and porches provide for harmonious transitions from
inside to outside. Planter boxes, 6alconie5, shutters, and soft accent lighting
accentuate the architectural forms gracefully and artistically.
Combined, these elements create the opportunity for SilverRocL to provide a
distinct world village' feeling within a resort village setting. Overall, the scale and
character will 6e a human scale, not institutional.
11
2. Color
The 6ase color Palette will generally 6e earthen tones compati6le with the
surrounding mountain color Palette. The colors will blend wit% the natural fabric of
the surrounding mountain terrain. Colorful accents compati6le with the natural
environment, Particularly the morning Pink, ala6aster and orange hues associated with
the various Parts of the day, will 6e incorporated. Shutters, doors, window 6oxes and
other exterior and interior elements provide additional opportunities for color
enhancement. Stone, materials, stucco treatment/application will 6e carefully
selected and applied to create a diversity of color combinations and depict a sense
that SilverRock is a harmonious melange of varying places and cultures.
The landscape treatment of the outdoor spaces will also 6e compati6le with the
natural environment, particularly cacti, succulents and desert wildflowers. In special
areas within the project the landscaping may further incorporate, annual flowers and
for additional color and accent.
Of course, creative use of silver provides wonderful opportunities to tie together the
different components of the resort, and to further develop and em6ed the SilverRocL
6rand within the psyche of its guests. Silver, like SilverKocL, is visually and texturally
subtle and soothing, elegant, and rich in character.
3. Textures
The thematic plan will also 6e expressed through textures, such as stucco, rock and
stone, wood, roof composition and wall treatments, with paving material and patterns
providing additional enhancements. The following are some ideas as to how textures
can 6e utilized to achieve the desired look and feel:
o The stucco color will 6e a mixture of earthen tones that blend well with the
mountain color palette (e.g., 6rown, grey, silver, green/patina and lilac tones,
incorporating dark stains)
12
o The roof will 6e a tumbled clay the with exposed mortar to achieve richness
and natural look. The roof color will incorporate the variety of colors
mentioned above as well as incorporate light orange and red tones.
o The stucco will 6e applied on walls in an authentic hand application.
`/`f hitewashing may 6e incorporated in certain areas to minimize reflective light.
o The rock/stone will 6e applied to elevation of the buildings where
appropriate, and incorporated into protect signage, the landscape/open
space areas and special treatment areas.
o The wood selected for doors and window frames will incorporate a distressed
appearance and heavy look to reinforce the Early California/Spanish
settlement era look and feel.
o Iron grills and door and window hardware help ground the structures,
promoting a sense of strength and security.
4. Detailing and Finishes
The details and finishes of the buildings, the interiors and the outdoor spaces will
complete the Silver -Rock Resort visual and physical statement of quality and
uniqueness. The architecture, the interiors, the landscape architecture, combined
with the overall quality of the resort services and amenities, will contribute
substantially to the attractiveness of traveling to and returning to SilverRocl< Resort,
and consequently its ultimate success.
The thematic details and finishes will receive careful attention in their selection,
installation and application. Among the thematic details and finishes contemplated
are: fountains; light fixtures; colorful the mosaics; outdoor sitting areas; outdoor fire
places; furniture; sculptures; thematic pots for plantings; sophisticated and varied
doors and windows; and interior furniture and fixtures. in addition, special floor
treatment, paving patterns and materials, as well as the incorporation of ' extra wall
thicLness at openings and exposed corners, will all serve to reinforce the sense of
richness and strength of each building.
5. Landscape Theme/Character
13
The outdoor spaces will also 6e treated in a thematic sense. The landscape and
hardscape materials will 6e grounded in the panish/Early California look and feel,
6ut also provide the opportunity to introduce other concepts from other places and
times. The outdoor spaces will 6e organized to facilitate the enjoyment of the
desirable seasonal climates, the maximization of dramatic views of the mountains,
sunsets and the stars, golf course and water features. Creating open spaces for
outdoor entertainment, retail, art exhibits, painting classes, and recreation will 6e a
high priority. 15icycle and walking pathways, along with the availability of thematic
electric resort passenger carts, will 6e the priority, leaving streets for automobiles.
The plant palette will reinforce the sense of the desert oasis theme already
established 6y the presence of the golf course. 5tretcke5 of desert-scape will draw
attention to the raw natural beauty of the terrain, but will lead guests through a series
of lush oases for respite and reflection. Fountains will greet guests at every turn, tying
together the varying spaces and adding a soft, almost unnoticea6le, yet highly
soothing sensory element of the sound of trickling water.
finally, outdoor landscape furniture, fixtures and finishes (e.g., pots, benches, shade
structures, fireplaces, pool areas, landscape wails, planters, garden entrances,
sculptures and more) will reinforce the wonderfully diverse yet grounded architectural
thematic concept envisioned for the jilverKock Resort.
14
ATTACHMENT 6
Hotels.'Are Making Room for Condominiums
The hybrid concept of
luxurychains:selling
some of their units is
gaining in popularity.
There are risks for the
developer and the buyer.
By MIKE SCHNEIDER
Associated Press
-ORLANDO, Fla. — Denver
attorney Jacques Machol loves
the hotel amenities he gets when
he stays at the Flontainebleau in
Miami Beach: room service,
housekeeping, ' linen service and
a complimentary breakfast.
But Machol isn't a hotel
guest. ,He recently paid $735,000
for his 1,100-square-foot suite.
The hybrid concept of a luxu-
ry hotel that sells some of it units
as condominiums has become
one of the most popular trends in
the industry in recent years.
Condo -hotels in the last two. or
three years have expanded be-
yond traditional markets in ski
resorts or Hawaii and into other
tourist destinations such as Or-
lando and Las Vegas. projects
also are under construction in
urban centers like Atlanta,. Chi-
cago and New York, where the
Plaza Hotel is being converted.
Hotel developers 1ike the con-
cept because they spread their fl-
nancial risk among the future
condo unit owners. Condo own-
ers like it because they enjoy the
resort -style luxuries, and in
many cases the hotel rents out
their units when they're away.
The condo -hotel units that
are rented are not the same as
J. PATCARTER Associated Press
MIXED USE: Broker Joel Greene with a model of the W Hotel
and condo building under construction in Fort Lauderdale, Fla.
traditional timeshares: Someone
who invests in a timeshare is en-
titled to only the time. that he or
she occupies a unit, while some-
one who invests Ina condo -hotel
unit buys it outright.
Smith Travel, Research, the
lodging industry's leading re-
search firm,: doesn't keep figures
on the number of condo -hotels in
the U.S. because the units' popu-
larity is so recent. But the hybrid
concept definitely is a hot topic,
said Jan Freitag, director of cli-
ent services for the Tennessee -
based firm"Every major player, the ma-
jor hotel owners in the country,
are looking at hotel condos, hotel
condo conversions, hotel condo
construction to see if it fits their
portfolios," he said.
The luxury hotel chains — in-
cluding Hilton Hotels Corp.,
• Four Seasons Hotels Inc. and
Ritz -Carlton Hotel Co. — have
brought newcredibility to a con-
cept that was used as a tax shel-
ter until the 1986 Tax Reform Act
eliminated the benefits.
"People have a lot more confi-
dence buying into a Hilton or a
Four Seasons becausethey know
the name. They know the quality..
They know it must be repu-
table," said Joel Greene, presi-
dent of the Condo Hotel.Center
in Miami, a brokerage that sells
such units.
Several factors have led to the
nationwide boom in hotel -condo
units — the improving perform-
ance of hotel companies, the re-
cent investment appeal of real
estate over the stock market, low
interest rates and baby boomers -
approaching retirement who
want to invest in a second home,
said Mark Lunt, a hospitality ex-
pert at Ernst & Young in Miami.
Hotel occupancy rates
dropped after the 2001 terrorist
attacks, limiting the amount of
Wall Street money available for
building hotels, so developers
went looking for another way to
finance their projects. A devel-
oper typically has to come up
with about 40% of the equity for a
traditional hotel; a' condo -hotel
development. requires much less.
investment.
But the concept has risks for
the developer and the buyer.
The Securities and Exchange
Commission considers the
condo offering a security if in-
come and expenses from the
rental units are pooled and if a
condo. unit is sold with . the ex-
plicit expectation that the buyer
Will earn money or derive tax
benefits .from it. If the develop-
ment is structured as a security,
then only a securities broker can
sell it, and it is easier for an inves-
tor to sue the developer under
the SEC's anti -fraud rules, Los
Angeles attorney Jim Butler
said.
Most developers choose not
to sell their projects as securities
to avoid the SEC complications,
so they are prohibited from dis-
cussing the economic or tax ben-
efits from a rental arrangement
or project or how much a condo
unit can earn in rental- income.
Many buyers make decisions
without all the facts.
"If you're not allowed to com-
municate', revenue expectation,
oftentimes buyers are making a
decision based on incorrect in-
formation or overly optimistic in-
formation,"Lunt said.
15