In Borrego Springs, development dreams -- and pitfalls
By By Christopher Reynolds
May 19, 2008 | 12:00 AM
The desert backcountry of San Diego County has always been a great place for long shadows -- the wiry ocotillo stalks at dawn, the oasis in Palm Canyon, the outline of a bighorn sheep on a rocky ridge at sunset. But in Borrego Springs right now, nobody throws more shade than a slim, 6-foot newcomer from Sherman Oaks named Gregory Perlman.
Sporting Ray-Bans and stubble, Perlman strolls the grounds of the oldest and foremost hotel in town, then stops at an outdated and awkwardly placed fountain near the Primrose building.
"This is terrible," he says. "This is 1982 Palm Springs."
The 42-year-old Perlman may look like a 32-year-old actor on hiatus, but he owns this place. And the place up the road. And several other places. Perlman and his investment partners have bought up thousands of acres here since 2004, including Borrego's largest golf-and-vacation-home community, now known as Montesoro. In December, his company GH Capital added the town's marquee hotel, the Casa del Zorro.
He's spent close to $45 million so far -- but he has also closed down one of the town's two grocery stores and inadvertently bulldozed a nearly 2-mile path through Anza-Borrego Desert State Park. On June 30, he'll shutter the Casa del Zorro for a summer overhaul, the first time anyone can remember that community institution closing for an entire season.
And so, if a desert outpost with fewer than 3,000 year-round residents and no traffic signals can be said to buzz, then Borrego is buzzing. Are Perlman and his partners visionaries who understand that this patchwork of ranch houses, mobile home parks, golf courses and desert dirt is the last piece of paradise left in Southern California? Or are they obnoxious latecomers who will ruin it?
"They're doing what they damn well please," says Chuck Bennett, a retired engineer who has been involved with Borrego civics for more than a decade.
"Anybody who has invested here is rooting for them," says Gwenn Marie, president of the Chamber of Commerce.
Certainly, Perlman's new neighbors can't complain when he calls this desert outpost "the most beautiful setting in Southern California that doesn't look at an ocean." They can only assume that the hundreds of fancy homes he wants to build will secure jobs and help boost property values.
But if you ask Perlman about the town's main drag, Palm Canyon Drive, he'll tell you, "The way it is now isn't quaint. That needs to be fostered."
If you ask Anza-Borrego park Supt. Mark Jorgensen, a 30-year resident, how the new guy is doing, he'll say, "We didn't know there was anything wrong with us."
Some towns boom and bust. Borrego Springs tends to seduce entrepreneurs, then exhaust them.
Like Palm Springs, Twentynine Palms and Joshua Tree, this desert retreat lies a few hours' drive from Los Angeles, cradled by dry, dramatic mountains. But Borrego is a sort of desert island: 70 square miles of unincorporated town (no chain stores or restaurants), surrounded by the 935 square miles of Anza-Borrego Desert State Park, the biggest state park in California.
Whether you live in a Santa Fe-flavored luxury home by the De Anza Country Club or a mobile home at the Roadrunner Club, you probably buy your groceries at the Center Market and stop for a cold one at Carlee's Place. Come October, if you're not marching in the Borrego Days parade, then you'll know a bunch of the people who are. The community directory, spiral bound, still lists four-digit phone numbers because everybody's number starts with 767. When the fire district buys a new ambulance, it's front-page news in the twice-monthly Borrego Sun.
Paved roads, telephones and outside electricity didn't arrive until the 1940s. James Copley, the late publisher of the San Diego Union-Tribune and one of Borrego's key boosters, took over the town's first hotel in 1960, renamed it the Casa del Zorro and built it into a 42-acre oasis of private villas and formal service.
Just up the road from the Casa, Rams Hill was supposed to transform the town in the 1980s with its golf course and 1,000 new houses. Instead it fell into bankruptcy -- twice -- leaving about 700 homes unbuilt, 18 golf holes unfinished and nine gone fallow.
This history is well known to Perlman. He knows that more than a quarter of the area's 2,856 residents are over 65, and that many flee every June, when five months of hundred-degree days begin. He can quote Borrego's hydrology reports in detail (Borrego is slowly drawing down its natural aquifer to meet the demands of its citrus growers, golf courses and vacation lodgings), and he can rhapsodize as well as any desert rat about the bracing scent of creosote bushes after rain.
But still he's an outsider, living in Encino with his wife and three children, working out of GH Capital's office in Sherman Oaks, visiting the desert once every week or two.
Raised in Los Angeles, he went to college at Boston University's School of Management, met his wife, then came back west. Beginning in the early 1990s, he made a specialty of buying and operating apartment buildings whose tenants rely on federal Section 8 subsidies. GH Capital owns about 12,000 of these apartment units, which translates into a steady stream of federal dollars. (HUD records show that all of Perlman's buildings are in compliance with federal standards.)
By 2002, Perlman was ready to branch out. First, he bought the Holiday Inn in Brentwood, spent $12 million renovating, then reopened it as the boutique-style Hotel Angeleno. In July 2004, a business associate told him about a distressed property called Rams Hill, a 3,100-acre planned community in the dry outback of San Diego County, midway between the mountain town of Julian and the Salton Sea.
So Perlman drove out, laid eyes on Borrego Springs for the first time, went looking for late dinner at the Casa del Zorro -- and was barred from the dining room for lack of a jacket. He ate at a table in the bar with two associates, taking in the foreign-born bar workers' Jamaican, Slavic and English accents, the darkened desert outside, the frolicking foxes painted on the walls (zorros, in Spanish), while the actor Matthew Perry, or his double, relaxed with friends at the next table.
It felt like "The Twilight Zone," he says, but it also felt more genuinely rooted in the desert than any place he could think of in Palm Springs or Palm Desert.
So he bit.
At the counter of Kendall's Cafe in the town's only mall, a stranger asking about Perlman is a conspicuous sight.
"He wants to own the town, I guess," says waitress Esther Mendoza, who has lived here for 28 years. "I don't like that."
Others count on him to stay and prosper. As goes Montesoro, says one real-estate broker, "so goes Borrego."
Two months after Perlman's night in the Twilight Zone, GH Capital bought the golf courses and hundreds of unbuilt lots at Rams Hill for about $15 million. Perlman announced that golf designer Tom Fazio would refashion 18 of the existing 27 holes. Later would come 600 new homes. The new name would be Montesoro.
"The town was pretty excited," says state park superintendent Jorgensen. "But some people set back with reservations and said, 'We'll see.' And I'm one of them."
The first bump in the road came when the Wiles Group, which GH had retained to manage Montesoro, dropped out of the project. Amid legal wrangling, the course fell behind schedule.
But Perlman kept buying. In mid-2006, he picked up the Whispering Sands Motel and converted it into employee housing. Then he added about 1,400 acres of land near the Borrego Air Ranch (including a 5,000-square-foot mansion and airplane hangar). Then the Borrego Valley Foods grocery store.
That was the second bump. Perlman had hoped to close the store -- "one of the most horrible stores you've ever seen" -- then reopen it with a more upscale focus. He lined up a manager to run it and rallied community leaders for a reception to celebrate the coming transformation, but the new recruit bailed out, he says, deciding she couldn't live in Borrego.
More than a year later, the building still stands locked and silent, produce shelves and checkout stands gathering dust. Perlman insists he has to wait until he's found just the right person to take it over. Otherwise, he says, "it's going to fail, and then people will be even more upset."
This misfire raised doubts about the new guy, and the events of May 8, 2007, raised a few more. That day, an employee of the Montesoro Golf & Social Club was assigned to blaze a trail for off-road vehicles on the land near the Borrego Air Ranch. Somehow he crossed property lines, and by the time he was done, the dozer had scraped more than half a mile of tracks across property owned by the nonprofit Anza-Borrego Foundation and Institute -- and almost 2 miles of tracks within the state park itself.
"That was a real jaw-dropper," recalls Gwenn Marie of the Chamber of Commerce. "We were all: What?"
By some accounts, gusting desert winds had rearranged the markers; others wonder if the stakes were misplaced to begin with. Perlman and Montesoro officials quickly apologized and took responsibility. Still, park superintendent Jorgensen told the Borrego Sun he was "appalled" by the "totally irresponsible" act. Since then, Jorgensen says, he has passed the case to the state attorney general's office, which is expected to negotiate a restitution price with Montesoro.
"We'll make it right," says Perlman. "This was just a total mistake."
Several weeks after that incident, Perlman's team staged a sales blitz and announced 52 homes and lots sold, for a collective $33 million, in a day. But the economy was slowing, and the mortgage market was headed toward upheaval. By Perlman's count, 18 of those deals later fell through.
Still, he kept building and buying. In November, after an estimated $20 million in work, the Tom Fazio golf course opened. Then, in December, Perlman bought the Casa del Zorro and its furnishings for $4.5 million.
For Borrego Springs, this was the abrupt end of an era. The last remaining Copley enterprise in town, the Borrego Sun, was left to cover the firing of 30 of the hotel's 115 employees.
The Casa del Zorro "was losing a lot of money," Perlman told a Sun reporter, explaining the layoffs and low purchase price. Buying the place, he said, "further confirms our long-term commitment to Borrego."
The sun is low. Shadows creep across the desert floor. Perlman wheels his black Lincoln Navigator through the Montesoro entry gate and is stopped by a sentry who doesn't recognize him.
"Greg Perlman," he says, baffled and amused, and explains that he owns the place.
He creeps up a hill past lots marked with red "Sold" signs, steps through the 150-year-old Mexican clubhouse door, schmoozes with homeowners in the bar area and talks about how the hotel and the golf development will feed off each other. He can give Montesoro residents access to Casa del Zorro amenities and remake the hotel as a lively oasis where a new generation of vigorous visitors just might be inspired to buy lots next door. Not the 150 sales a year he once hoped for, but 30 to 45 in the next year.
So with the help of the private equity firm Lubert-Adler, Perlman plans to spend many more millions. He will add a hotel spa and fitness center, rip out the central parking lot and replace it with a landscape of kivas and fire pits, agave and ocotillo, gazebos and footpaths. A rock-climbing wall. Classes in tai chi, Pilates, photography, painting. At least for now, he's talking about charging $395 per weekend night at reopening, which is less than last year's rates.
But for Perlman to reopen in October and capitalize on the fall tourist season, all these changes have to happen in the space of three sweltering months. Instead of dropping in every week or two, Perlman expects to spend three days a week here, sweating details. When it comes to details, he says, "I'm very, very particular."
In other words, Borrego Springs and its new maverick are about to get to know each other a lot better -- and that fountain by the Primrose building hasn't got a chance.