Plan for almost 400 apartments in Palm Desert on hold due to financing delays

Plans for a 394-unit apartment complex along a main thoroughfare in Palm Desert are on hold with no clear construction timeline, as the lead developer faces delays in financing the project due to challenging market conditions.

The proposed development, which calls for 13 three-story buildings just southwest of the corner of Frank Sinatra Drive and Portola Avenue, gained approval from the city council in January 2023, despite pushback from a few people living in nearby neighborhoods, such as The Retreat at Desert Willow.

But a little over a year after the council’s decision, the project from Minnesota-based development group Hayes Dietrich LLC faces an uncertain timeline. Cody Dietrich, the group’s president of development, confirmed to The Desert Sun that the project is on hold due to challenges in getting the necessary financial capital.

“We’ve just been trying to figure out solutions,” Dietrich said. “We’re waiting to proceed and finish with those (specific project) drawings until we know the capital markets and figure that piece out.”

Dietrich cited rising interest rates, as well as larger investors’ inclination toward projects in larger metropolitan areas, such as Phoenix and Los Angeles, as a pair of factors that led to the past year’s delays. He added the development team still hopes to move forward with the project.

The project was also listed as being “on indefinite hold” on the city of Palm Desert’s online projects map , after a full year passed without further action from the developer. (That designation is no longer listed online for the project.)

“After the City Council approves a project such as the Frank Sinatra Drive/Portola Avenue Apartments, the applicant has one year to obtain a building permit and commence construction,” city spokesperson Thomas Soule said in an email. “The one-year window for this project expired in January 2024 without any further action from the developer.”

While the project won unanimous approval from the council early last year, it received considerable pushback — including an appeal of the planning commission’s initial decision in support — from people during the public input process.

Residents of The Retreat at Desert Willow, just across Portola Avenue, raised concerns about the complex having three stories, as well as its potential impacts on traffic, the environment and the neighboring community’s mountain views. Another person living in a home north of the project was worried about a loss of privacy from people potentially looking into her backyard from its upper floors across the street.

But the project had solid backing from the council. While it isn't designated as affordable housing — Dietrich said it’ll be “100% market rate-driven” — council members viewed it as an important step toward greater variety in the mix of homes in the city’s north region.

While the Portola Avenue apartment complex faces an uncertain timeline for construction, other projects nearby have recently moved forward , part of a boom in housing planned for north Palm Desert. Late last month, officials broke ground on a new affordable housing complex with 176 apartments near the corner of Dick Kelly Drive and Gateway Drive.

More: Long-planned apartment complex with 176 affordable units coming to north Palm Desert

The area surrounding that complex, known as the Crossings at Palm Desert, is primed for considerable growth in the coming years, with more than 4,500 units either under construction or approved by the city north of Frank Sinatra Drive. And some of those will be set aside for people with low or moderate incomes: The city has 1,011 new affordable housing units that are either under construction or in the pipeline at city hall.

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: Plan for almost 400 apartments in Palm Desert on hold due to financing delays