Wessman’s Wins: The Developer, the Recipient of Many Millions in Taxpayer Dollars, Has for Years Made Money by Sitting on Property—Until the Timing Is Just Right

A bottle, perhaps two, of Barolo might have helped cost the city of Palm Springs a fortune.

The Italian red wine was served during a meeting in 2010 between Steve Pougnet, then Palm Springs’ mayor, and developer John Wessman. Before the meeting, Pougnet had publicly talked about filing eminent-domain proceedings against Wessman’s Desert Fashion Plaza—which the developer had kept largely empty for almost a decade.

The following day, at the State of the City luncheon, Pougnet announced a deal with Wessman and a “new downtown vision that will benefit all of Palm Springs and the valley.”

The bond between Pougnet and Wessman grew after that. The mayor was hired to work for the Palm Springs International Film Festival—which has long included Wessman as a board member and vice chair. IRS records show that the Palm Springs International Film Society, the nonprofit that runs the festival, paid Pougnet $37,500 in the fiscal year 2011-2012, while Wessman Development Co. was paid $90,638 for building rent.

That was not the first time Pougnet and Wessman would find their financial interests linked.

In 2012, according to public records, Wessman purchased a property at the foot of the Tramway Road for $1.1 million. The property, known as Pedregal, was once owned by developer Dennis Cunningham, who lost the development. In addition, the City Council, led by Pougnet, awarded Wessman $4 million that Cunningham owed in bonds on the property.

The high-profile FBI raid of Palm Springs City Hall on Sept. 1, 2015, gathered documents and other evidence regarding Pougnet’s deals with developers, including Wessman. But beyond the ongoing scrutiny and the corruption probe, Wessman finds himself busier than ever.

Despite his high profile, Wessman remains an enigma: Not much is known about the man himself. His age is even hard to pin down; a Palm Springs Life article from May 1980 said he was 40 then; if accurate, that would make Wessman now 76 or so.

Wessman—who did not directly respond to requests to speak to the Independent—grew up on a farm in Hemet, surrounded by his six brothers and Swedish-born parents. As a teen, he worked in construction and never finished a college.

In 1964, he was employed by a construction company owned by Warren Coble and Arthur Press. A year later, Wessman bought out Press, and in 1972, he parted with Coble as well.

He’d soon develop one of the most unusual—and profitable—developing philosophies the valley has ever seen. In that aforementioned Palm Springs Life piece, he stated: “… I make more money from keeping property than I do by building and selling.”

The most prominent example of Wessman’s business strategy can be found smack-dab in the midst of downtown Palm Springs. It all started with the Desert Fashion Plaza, which he managed to keep largely vacant after purchasing it in 2001. Over the years, he held on to the property—and wore down many of his critics, a group that at one time included Pougnet.

Then in 2011, Palm Springs voters approved Measure J, a 1 percent increase in the city sales tax slated to be used on various city projects. Soon thereafter, the Palm Springs City Council, lead by Pougnet, opened the city’s wallets for Wessman Development Company.

“In the initial round,” said local real estate broker Robert Stone, “he got $32 million in public funds to help with the private improvements to the Desert Fashion Plaza parcel. It was simultaneously accompanied by another $11 million for streets, sidewalks and infrastructure improvements that are typically a developer expense.

“Then there were a bunch of change orders to the original giveaway,” Stone said. “When Wessman failed to provide adequate open space as required by the city’s specific plan for the site, the city bought a large parcel from him and made it permanent open space. They paid him $5.3 million for it, based on an appraised value which considered the value of the parcel if fully developed.”

One of the key elements of Wessman’s development is a Kimpton Hotel, rising quickly where the Fashion Plaza once was. However, Wessman has never built a hotel before.

“The 155-room Kimpton Hotel is our first hotel project,” said Michael Braun, the senior vice president at Wessman Development Co.

According to Braun, who’s also Wessman’s son in law, the Kimpton will be first new relevant large hotel in Palm Springs since 1988, when what is now the Renaissance was built.

Wessman recently announced plans to build yet another significant hotel downtown: a 150-room Virgin Hotel. Some opponents of Wessman’s project have expressed concerns about density, traffic and parking space for the proposed 69-foot-tall hotel. According to Braun, there is no problem.

“Based on current approvals, the downtown site has more parking spaces than required,” Braun said.

Another problem is the current occupancy rate for Palm Springs hotels, which is less than 60 percent. Additionally, other hotels may be built soon, including one by the Agua Caliente tribe on its downtown property.

Again, Braun said there was no problem. “You have to distinguish between various hotel-product offerings,” he said. “Palm Springs needs several new four-star products to attract a different tourist segment. The … occupancy rate is irrelevant, as it relates to all product offerings in Palm Springs.”

According to Judy Deertrack, a local urban lawyer, the downtown project morphed over time into something quite different than what was in the original plan.

“There has been no attempt at a market study or feasibility study since 2011, even though the project has grown from an expected $110 million in construction costs to its current estimate of $350 million,” Deertrack said.

“All the way through, the downtown development has shown a lack of public hearings and transparency, (and an) inappropriateness (in) the way the entitlements have gone through on the consent calendar and new business agenda without public notice, hearings and citizen review,” she said.

Over the years, Wessman has been associated with at least 44 companies, according to public records; 33 of the companies are still active.

“About five years ago, I did a search to find out how many parcels Wessman owns personally or in conjunction with other investors under his many DBAs,” Stone said. “At that time, he owned 135 properties in the valley. They were all commercial properties or unimproved land.”

Deertrack expressed serious concerns about the ongoing FBI investigation.

“The elephant in the room,” Deertrack said, “is the connection between the ongoing public corruption investigation, for possible fraud or undue influence, and the extraordinary entitlements granted to Wessman. The cities are prohibited from granting contracts or land entitlements to a developer or party who is a source of income to any City Council member, the mayor included.”

As for the FBI probe, Braun had only this to say: “It is company policy not to comment on any ongoing investigation.”

Meanwhile, Pougnet is no longer part of the City Council. While the new council slate seems to be keeping a more watchful eye on Wessman’s project, new Mayor Rob Moon said via email that construction will definitely continue.

“At our last City Council meeting, our council agreed unanimously that we were not content with continuing to ‘kick the can down the road’ on the downtown development. As I said at that meeting, further unnecessary delay is not fair to the developer, the residents, and certainly not to the downtown businesses who have been impacted by construction and the associated traffic, dust and noise. The council therefore stepped up to the task for which we are responsible, and we voted on each and every designated block and decided on height, density and setback for each of them.”

Moon said that while Wessman is currently planning to build two hotels, he has agreed not to build a third—at least not for a while.

“Wessman Development has agreed not to build a third hotel, currently described as a JC Marriott, until the members of the downtown hotel association have two years of occupancy over 62 percent,” Moon said. “That is a request made by the other hoteliers, which our Planning Commission has publicly supported, as well as the City Council. Nobody, least of all the other hotel owners, want to saturate the market.”

As for what Deertrack called the “elephant in the room”: What would happen to the city funds given to Wessman if he or Pougnet were ultimately prosecuted?

Moon said he did not know the answer to that question, and that he would forward the query to City Manager David Ready. Ready, in turn, forwarded the question to City Attorney Doug Holland.

“The developer’s obligations are secured by a performance deed of trust, and in the event the developer defaults on its obligations, the city has the right to exercise its rights under the performance deed of trust, and ultimately force a sale of the property for which financing has not been secured, and building permits have not been issued,” Holland said “This is the city’s primary enforcement tool.

“The city has acquired the parking structure and certain lots, and therefore, the payments for these assets would not be part of any default. Two properties have been released from the performance deed of trust (the Kimpton parcel on Block C-1 and the “West Elm” building on Block A) because these properties were fully financed, and building permits were issued. The remainder of the project is still subject to the performance deed of trust.

In other words … since the Kimpton and West Elm properties have been released, the city would have no real recourse regarding those parcels should criminal charges be filed.