The Town of Paradise Valley and Scottsdale-based Five Star Development have settled a lawsuit over the Ritz-Carlton-anchored Palmeraie development on the Paradise Valley-Scottsdale border.

Paradise Valley and Five Star Development have reached a settlement to end a nasty public battle over the 122-acre Palmeraie development that straddles its border with Scottsdale.

When complete, the development at Lincoln Drive and Scottsdale Road will include a Ritz-Carlton resort, residential villas, multi-million-dollar homes, retail, dining and office space.

The development is mostly located on 105 acres within Paradise Valley, though some parts also fall within City of Scottsdale’s boundaries.

Under the terms of the settlement, the Scottsdale-based developer has agreed to pay the town over $5 million in addition to an ongoing hotel surcharge to settle disputes over local infrastructure obligations approved by the town council in 2016.

Those improvements were at the center of a lawsuit filed by Five Star against the town in June 2020.

Five Star alleged Paradise Valley was attempting to rewrite infrastructure obligations assigned to the both parties in the development agreement.

The suit claimed the town demanding payment for around $2 million in underwater storm water drainage infrastructure that the company said was not included in its agreement.

The town filed a counterclaim in October 2020 asking a judge to declare Five Star in breach of the agreement and order the company to pay its portion of local street improvements included in the agreement.

In a press release, Five Star said the lawsuit followed months of “attempted coercion” by the town, accusing Paradise Valley of threatening to hold up necessary permits and certificates of occupation for the development’s buildings.

“This is a shakedown, pure and simple,” Five Star President Jerry Ayoub said in the release.

Town officials denied the allegations, arguing the infrastructure obligations were clearly defined in the development agreement.

They said Five Star was just using the suit as leverage to extract zoning concessions in the future and to request certificates of occupancy for its Villa condominiums before timelines were achieved.

Both sides struck a different tune in a joint press release issued recently.

“We are pleased to collaborate with the Town of Paradise Valley under Mayor Jerry Bien-Willner’s leadership in order to put this issue behind us and move forward with a renewed sense of alignment as we near the opening of the first phase of The Palmeraie, a cornerstone of our $2 billion development, in 2022,” Ayoub said in the release.

Bien-Willner issued a similar statement.

“Throughout this process, as with all approved private development projects in the Town, the Town’s goal has been to honor its commitments while rooting for the successful completion of the project,” he said. “We’re pleased that the Town and Five Star could collaboratively and amicably work through our outstanding issues.”

 Under the new agreement, the town will receive over $5 million in payments in exchange for agreeing that Five Star has met several of its obligations outlined in the original development pact.

Five Star also agreed to an ongoing payment to Paradise Valley that will be funded by a $10 surcharge on all occupied hotel rooms in Ritz-Carlton resort for at least six years.

The surcharge agreement will remain in effect for no less than six years and will terminate automatically when the town has received surcharge payments from 300,000 total room nights. The resort is scheduled to open in late 2022.

Five Star also agreed to pay the City of Scottsdale for all plan review and inspection costs associated with the development.

The settlement states that Paradise Valley will provide no zoning concessions to the developer in exchange for the settlement, though Five Star is still free to request zoning changes if it desires through the town’s normal entitlement process.

The agreement also clarifies that there are no disputes between the two sides over the timing for issuance of certificates of occupancy for the resort villas or luxury homes that are part of the development.