Can the private sector build rental business?
By the numbers
98.1: Current occupancy rate of valley apartment complexes.
70: Approved units at a new apartment complex in Edwards.
18: Number of those units that will be earmarked as affordable housing.
2008: Date the valley’s last apartments were built — at Tower Plaza Suites in Gypsum.
EAGLE COUNTY — Can the open market help ease the Vail Valley’s rental shortage? Vince Riggio thinks it can.
Riggio is the founding partner of Trinity Development Group. That company recently received county approval to build a 70-unit apartment complex in Edwards, just west of the Eagle River Village mobile home park on the south side of U.S. Highway 6.
The project is a rare one for a couple of reasons. The first is that there haven’t been many big construction projects in the valley since 2008. The bigger reason for rarity is what Trinity is trying to accomplish — build apartments without public-sector involvement.
Fully-private apartments are rare in the county. Since the 1980s, the Plaza Tower Suites in Gypsum is the only complex built in the valley without some level of public-sector participation. That participation runs the gamut from full government involvement — Lake Creek Village — to a municipality working in partnership with a developer. In the case of the Lion’s Ridge apartments in Vail — now being built on the eastern half of the Timber Ridge apartments property — the town essentially provided the property for the project.
Those partnerships can be hard to put together. The town of Vail bought the Timber Ridge apartments in the early 2000s, then spent nearly a decade and went through a handful of developer proposals trying to put a plan together.
Eagle County Housing Director Jill Klosterman said what’s driving Trinity’s project in Edwards is something as old as commerce itself — supply and demand.
With a few exceptions, housing has always been in short supply in the Vail Valley. Supply is exceptionally short now. Demand can help drive up prices, and private development isn’t restricted on price.
“At today’s average rents, it would be really hard to (be profitable) assuming rents stay where they are,” Klosterman said. “I’m sure they’re banking on rents continuing to rise.”
Polar Star Properties manages several apartment complexes in the valley, including the Buffalo Ridge and Eaglebend communities in Avon. An April occupancy and rental-rate survey of the valley showed a vanishingly small vacancy rate — just 1.9 percent.
Klosterman said that’s a tight market even by this valley’s standards, especially since the survey included April, when many seasonal employees are leaving their leases.
Part of the tight supply is due to losing more than 100 units at Timber Ridge while Lion’s Ridge is under construction. Still, Riggio believes the time is right to build.
But questions remain whether the Edwards project can be built.
Riggio said his team will meet soon with a couple of contractors to hammer out cost estimates. Those estimates then will be presented to lenders. If the finances line up, then work could begin as soon as this fall, with an eye toward having units on the market by the fall of 2016.
But make no mistake, building this 70-unit complex is going to be expensive.
In 2007, Riggio volunteered for a citizen board advising local governments on housing issues. At the time, he made clear to that board that various government fees make building apartments a very expensive proposition.
“By the time you add up building permits, water district fees, transportation fees … by the time you’re done, you’ll have $20,000 to $25,000 per unit in fees.”
Riggio said some of those fees are essential — more people put pressure on roads, water supplies and schools, among other things. But, he added, the various fees need to be closer to $9,000 per unit. Riggio suggests that now would be a good time for county officials and developers to meet to discuss how to lower the costs associated with apartment projects.
The private sector is probably going to be a crucial part of building more housing in the valley. Klosterman said county officials continue to look at possible locations. But Eagle County doesn’t have a dedicated housing fund, which makes finding land more difficult.
“We have to be really thoughtful in how we pursue projects,” Klosterman said.
Trinity is going ahead with its project because the company believes it can make a profit. But, Riggio added, he believes the Edwards project could kick-start other development along that portion of U.S. Highway 6.
And, while the rental market is exceptionally tight right now, Klosterman said the current crunch is evidence of strengthening economy.
“Still, I think (housing) will be a priority for this group of (county) commissioners,” she said.
Vail Daily Business Editor Scott Miller can be reached at 970-748-2930, email@example.com or @scottnmiller.