Vail Health, Breckenridge Grand Vacations partner on 87 new employee housing units in Edwards
Scheduled for completion in 2024, the Edwards development will add master lease, deed-restricted units to the company’s workforce housing portfolio
Last week, Breckenridge Grand Vacations (under its Edwards Property LLC) closed on a 3.5-acre parcel of land in Edwards that will be developed in partnership with Vail Health into 87 condominium units for workforce housing.
“This project is an example of how collaboration between two local organizations with similar end goals can help address a critical issue in our community,” said Will Cook, president and CEO of Vail Health, in a prepared statement. “This is the largest private, deed-restricted and free market employee housing joint venture project in Eagle County, and Vail Health is proud to partner with BGV Edwards Property LLC to make it possible.”
This partnership began with the parcel of land — which is located at 18 and 22 Murray Road, between the EagleVet clinic and the Edwards Interfaith Chapel — and its entitlements. The nearly 4-acre parcel, known now as Fox Hollow, was entitled for 87 units across 13 multi-family buildings, with 36 of the units slated for deed restriction.
With a combination of both free-market and deed-restricted units, the developer faced a bit of a challenge in making it a financially viable project.
“We were originally looking at purchasing this site because we thought it had a beneficial entitlement,” said Graham Frank, managing member of BGV Edward Properties LLC and BGV Avon, LLC, the development entity behind the new condominium project Frontgate Avon. “We were looking at the project to figure out how we were going to deal with the deed-restricted units in terms of their financial viability and then we were going to go sell the remaining units at market rate.”
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Conversations with Vail Health began with BGV offering up some of the deed-restricted inventory with the knowledge that it had just broken ground on the nearby Precourt Healing Center in Edwards, Frank said.
However, as the two parties continued conversations, the discussion pivoted from how the developer could meet its “maximum financial gain” to how it could meet the most “comprehensive gain for the valley,” Frank added.
It was through this “pivot” that Vail Health and BGV reached an agreement for Vail Health to purchase 28 of the deed-restricted units and master lease the remaining 59 (eight of which are also deed-restricted and 51 that are free-market) from BGV for the next 10 years. All of which will be used for workforce housing.
“One really unique thing about this project: there’s not one public dollar going to this project; no governmental dollars, no tax breaks, nothing,” Frank said. “We were able to figure out a way with Vail Health to get a viable return paying market rate for the land (we bought the land for the listing price). We’re keeping construction costs down through modular building and through using our utilizing our resources from Frontgate.”
Craig Cohn, the chief real estate development officer for Vail Health, said that from a cooperative standpoint this was a project with two different organizations with aligned, but different, goals.
“We were able to look at an existing entitlement and figure out a way to make it work so that the seller could sell the land for what they needed to, Graham could buy the land for what he needed to, he could build for what costs are today, and we could rent at a number that was advantageous to us,” he said.
Vail Health has been making “very large investments into health care facilities,” in recent years, Cohn said. And while this comes with a need to also invest in housing, the organization “can only make so many investments in the same year” and has only “so much money we can invest,” he added.
This creative solution, made between Vail Health and BGV, allows the organization to “get much more inventory than we could afford to purchase” in a responsible manner, without overspending, Cohn said.
“We have a long-term lease, which acts like ownership but gives us the ability to invest in our people long term without making us cash strapped for other health care investments that we also need to be able to keep up with for our overall business health” he added. “This was a great creative solution of us controlling a lot of inventory without having to buy it all or burden ourselves with additional debt to try to take it.”
Plus, with this much inventory, Vail Health is then “in a position to rent inventory to our employees at the rate they can afford based on what we pay them not what the market rate is for the apartments like our employees are doing today,” Cohn added.
As the project is still in the beginning phases, the organization has yet to determine how it will calculate affordability for its employees nor how it will prioritize the placement of employees into units.
Solving a mounting challenge
Like many other local employers as well as national health care businesses, Vail Health has been facing a labor shortage.
During the last six months, Vail Health’s vacancy rate for staffing has been between 15% and 19%, according to Sally Welsh, Vail Health’s director of public relations. This, she added, is compared to a national benchmark of 19% for vacancies in the health care industry.
“A lot of that is related to the fact that the cost of living — not just the cost of housing, but our child care costs, our transportation costs, our food costs — our total living costs are more challenging here in the valley than in other health care markets,” Cohn said.
In his role at Vail Health, Cohn works closely with the company’s human resource department, and according to him, the organization’s two biggest “dissatisfiers” in recruiting and retaining staff are housing and child care. This, he added, also means childcare and housing are some of Vail Health’s highest priorities to supply both the resources and offset the cost of these resources for its employees.
While Vail Health currently has around 1,500 employees, Cohn added that by the completion of Fox Hollow — expected by the second quarter of 2024 — this number is likely to be closer to 1,700.
“What we’re finding with health care is if we’re expanding our services that we’re delivering to the community and we can’t staff those services, it doesn’t matter what I build, what we build, what we invest in, if we don’t have the staff, we can’t provide the service. So housing has really become the linchpin in our success,” Cohn said.
“It has really become a high focus for Vail Health as a large employer in the valley to make sure that as we’re growing on the services we provide, we can actually deliver that service, which comes down to staffing.”
Not only will this project nearly double Vail Health’s inventory of housing from 93 units to 180 — increasing its total employee bed count by 58% from 160 beds to 380 — but it also creates a diverse combination of housing opportunities that reflects the diverse range of employees and their housing needs.
“There’s definitely no one size fits all solution in housing when you’ve got 1,500 people at a very broad pay rate range,” Cohn said. “What this diversity does is it helps us match up better.”
“By us stepping in and taking these deed-restricted units and coming to a price that was favorable, we are able to charge below market rent to our staff. And I think both for their quality of life as well as for our ability to recruit and retain them, that’s a significant benefit beyond just what they’re making in salary and traditional benefits,” he added. “This housing is going to help us not lose staff to other regions of the country.”
Right now, because of its limited inventory, Cohn said that a lot of Vail Health’s housing units are used to support staff for the first three to 12 months that they live here and then cycle their staff through. This increase in inventory not only allows the health care organization to meet the needs of more of its staff and new hires but also allows it to support its employees long-term into their careers.
“What having this much inventory does for us is we can now start to offer long-term leases that can really be available for you for the term of your employment, however long that might be, and we hope it’s your career,” he said. “You’re paying rent, but we’re never going to ask you to move out because we have enough inventory to sustain you until either you choose to move out or you choose not to work for us. But there won’t be as much pressure to cycle our staff through the housing.”
Cohn said that while the intention is to use the housing at Fox Hollow for Vail Health employees, if there are vacancies, “we certainly have no restriction on leasing to other tenants and we would likely do that.”
Teachers, he added, are top of the list as it relates to child care challenges.
“We may look at other partnerships now that we have some inventory to work with,” Cohn said.
A unique partnership
Fox Hollow will be the first project that Breckenridge Grand Vacations has been involved in that will entirely be devoted to workforce housing — in addition to another project in progress in Breckenridge.
“As an organization, we feel like all of the mountain communities need (housing) and we need it yesterday, we don’t need it right now; the time has come and gone,” Frank said.
With this in mind, both Cohn and Frank expressed a desire for this unique partnership to serve as an example of a different way to build solutions to the valley’s housing crisis.
“We think that more of these things need to happen to move the valley forward,” Frank said. “Not just between our group and Vail Health, but I think these are the solutions that people need to be working on that are financially viable and help the valley, because otherwise we’re not going to all be able to continue producing in the valley, there’s just not going to be space.”
For Cohn, this partnership is an example of “two private organizations that were able to figure out how to be good, productive partners.”
“I’d encourage other developers and other employers in the community to look at things not from opposing sides, but from the same side because a lot of good can come from that,” he added.
BGV Edwards is on track to break ground at the site in spring 2023, with Vail Health projected to take possession of the first units by late 2023 and full completion scheduled for the second quarter of 2024. With 13 buildings, the property will have 87 units, including a mixture of one-, two-, three- and four-bedroom units.