Build-to-rent market blossoms in Colorado

Politics may make for strange bedfellows, but the burgeoning build-to-rent market appears to be a matchmaker of suitable note in Northern Colorado.

Certainly that seems to be the case of The Cottages at Erie Commons, a partnered development between Louisville-based developer Boulder Creek Neighborhoods and Denver-based Urban Cottages, a company that previously had been primarily involved in master plan development. They combined to offer single-family units — which distinguish build-to-rent, or BTR units, from multi-family apartments that commonly house renters — at rents far lower than the monthly mortgage payments.

“We’d been looking for something like this for four years,” said Urban Cottages founder Jeff Handlin, who actually had business dealings with David Sinkey, president of Boulder Creek Neighborhoods, for quite some time. “This project was perfect.”

Sinkey said Boulder Creek originally intended to develop the 151-home project the way the company has always done: by building more slowly, and selling as the market allowed.

But three things changed dramatically, as this project was unfolding, Sinkey said. First off, during the pandemic a great deal of money became available for build-to-rent projects as the market evolved and the premise of building to rent was proven across the nation.

Nationally, reports estimate build-to-rent completions have increased more than 250% since 2019. CoStar analysis said nearly 25,000 build-to-rent homes were completed in 2023, a 62% increase over 2022, accounting for $7.5 billion in investment.

Sinkey said attitudes in Boulder Creek’s Front Range marketplace were also changing. “There was a growing willingness of higher-income people to rent,” he said.

But perhaps the most compelling reason that this project became a BTR play was what interest rates were doing to monthly mortgage rates, Sinkley said. “As the interest rates more than doubled, we were being substantially challenged with that cost … and what the target market was.”

Urban Cottages was also new to this game, as the partners in this company are mostly engineers and community development experts involved in master plan developments. Partner Chase Stillman was given the reins to head the new company sector which buys the Erie Commons units as they become available and hands them over to rental and management firms.

The smaller two- to three-bedroom units, about 1,200 square feet, were probably going to have mortgages between $4,000 and $5,000 Stillman said.

“We’re able to rent them for $2,900,” he said.

Not all the BTR partnerships are quite this simple. For instance, in Loveland and Broomfield, McWhinney, a Loveland-based developer, has partnered with AHV Communities of San Antonio, Texas to enter the BTR marketplace in Colorado with about 500 BTR units now available.

AHV is a leading player in the BTR market, with more than $2 billion in development investments, but these two developments are the company’s first in Colorado. As with the Cottages, they are smaller units. The Finlay model in the Broomfield Baseline development, for example, is just under 1,400 square feet.

The 240 rental homes in Loveland – these are located in the Centerra development’s Kinston community – were expected to be built by this time. McWhinney declined to participate in this article, except to say that the units were not just sold to AHV. Other corporate information states the units were “co-created.”

In Lafayette, Boulder Creek found its foray in the BTR market successful enough that it is now offering its own rental units. Barrylinn Townhomes, located near Colorado Highway 42 and Arapahoe Road, now has 17 units for rent.

“We were really encouraged by our experience with Erie Commons,” Sinkey said. “The buildout is much faster. With this community being entirely sold … our buildout is three to five years faster.”

In Erie Commons, Boulder Creek is also avoiding marketing and brokerage costs. The town of Erie is also able to add properties to its tax rolls much faster.

Erie town officials were happy to see more rental properties added, Stillman said. “They had determined only 11% of their housing units were available to rent,” he said.

Part of the beauty of the Erie Commons partnership was that both Boulder Creek and Urban Cottages had the same vision: Smaller units developed in a modern urban master planned neighborhood.

“Square footage has boomed (for most Colorado homes) and now that we’re hitting an affordability crisis they are looking at things differently,” Stillman said. “This has worked well in other parts of the country and now we’re able to offer rental homes at the price we always targeted.”

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