Agency claims sale voids restrictions on SilverRock

Public Record, The, Aug 17, 2004 by Kleinschmidt, Janice

As La Quinta proceeds with developing its SilverRock golf resort, it seeks assistance from the Superior Court of California to preclude any future questions that may arise from agreements it signed when purchasing the 526 acres two years ago.

The La Quinta Redevelopment Agency has filed a suit against KSL Desert Resorts Inc. and KSL Land Holdings Inc. for declaratory relief, breach of contract, specific performance and cancellation of written agreement.

According to the complaint, the parties entered into an agreement on July 18, 2002, restricting the number of hotel or condo-hotel rooms, the size of conference and meeting space, and rental rates.

An Additional Agreement of April 29, 2002, required (1) the city to offer discounts or preferred tee times to La Quinta & Club guests, (2) the owner of any condo-hotel developed to allow KSL to compete for a management contract, and (3) the operator of meeting or conference space to permit La Quinta Resort access on the same basis as any other private commercial user.

The agreements were set to expire at the end of seven years or upon the sale or transfer of the La Quinta Resort property or a controlling interest in its management. This past April. CNL Hospitality Properties Inc. - a real estate investment trust headquartered in Orlando, Fla. - completed acquisition of KSL and its six destination resorts, including La Quinta Resort & Club and PGA West in La Quinta.

The redevelopment agency thus contends the restrictions set forth in the agreements "automatically terminate" and are "of no force or effect."

According to the complaint, the agency on May 6 issued a Notice and Demand that KSL provide a quitclaim deed as called for under the terms of the agreements "in order to remove [the agreements] as a cloud on title to the property." KSL allegedly never responded.

In any event, the redevelopment agency contends "the AntiCompetition Restrictions are legally disfavored, run counter to strong public policies against restraints on the free alienability of property and restraints on free competition and as such are void or voidable." It further claims that if the agreement is not cancelled, it could suffer serious injury by being forced to defend a lawsuit filed by KSL based on the restrictions.