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Hundreds of homes planned in Colorado as international real estate investor goes big on build-to-rent market

Denver Business Journal, 2021/06/25

An international real estate asset management company that owns 81,000 acres nationwide is making a big play for the wildly popular build-to-rent home market, and its plans include several projects in northern Colorado.

Scottsdale, Arizona-based Walton Global Holdings is launching a build-to-rent, or BTR, line of business to develop roughly 2,500 single-family rental units across the country. For Colorado, that will mean hundreds of new single-family rentals, along with thousands of accompanying for-sale homes.

With so much of its own land on hand, the company is in a position to bring single-family rentals to market faster than other homebuilders that are still trying to find land, said Paul Megler, executive vice president of Walton Global Holdings. Initially, the company is planning to launch its build-to-rent projects on 17 master plans it already controls, across a range of geographies, Megler said.

Megler is in talks with various homebuilders, apartment developers and others in the business to create joint ventures to develop these communities.

Of the 81,000 acres across the U.S., more than 3,000 acres are located in Colorado, said Jen Ruby, Walton's senior vice president for land in Colorado and Arizona.

First up: Loveland, Lochbuie

Walton's initial launch of its build-to-rent offering will include four master plans in Colorado. The single-family rentals will be part of larger residential developments that will also include for-sale product and potentially some commercial development, depending on their size, according to Ruby.

Two of the projects are further along and will likely be built first, Ruby said.

The first is a 100-acre piece of land in Lochbuie, northeast of Brighton, where Walton and its partners plan to build a total of approximately 600 homes, of which 75 to 125 could be single-family rentals.

The second is a 254-acre parcel that Walton is annexing into the northwest corner of Loveland. About 1,000 homes could be built there, of which between 100 and 150, approximately, could be single-family rental, Ruby said.

Walton also owns about 100 acres that will get annexed into Berthoud, and another 340 acres in unincorporated Elbert County, Ruby said. Plans for those projects are still early, but Ruby said the number of single-family rentals will likely be in the range of 100 units.

"We've got the piece that many people are struggling with right now," Ruby said. "There are a lot of people who want to be in this build-to-rent space, but finding projects is a big upfront challenge. We already have that piece."

Locations farther out from city centers offer the opportunity to build more affordable product, Megler said. They're also consistent with where the company believes Colorado will grow in the future.

"Our land holdings are primarily in paths of growth," Ruby said. "The idea is we want to be in the next tranche of development. We want to be where everybody's going, not necessarily where everybody already is."

Typically in the past, Walton has sold for-sale master plans to homebuilders. But in the fall of 2020, the company took a fresh look at its portfolio and began considering where it could add single-family rental product.

"There's been under-building in single-family for a long time," Megler said. "The demand, from a demographic perspective, is growing tremendously, and you're seeing that in the for-sale side as well. And then you throw a little bit of kerosene on the fire, Covid, which really provided the opportunity for people, and the want and need for people, to have single-family housing. It's becoming a very under-served space."

Thomas Brophy, research director for Colliers International, said more than $30 billion in investor capital allocation announcements have been made within the single-family/BTR asset sphere so far in 2021 alone.

"What makes the Walton announcement unique is that they are an institutional landholder with many shovel-ready properties and have the ability to execute their strategy quickly," Brophy said. "Given significant, sustained demand the asset class has witnessed over the last several years would suggest that we are only in the beginning phases for the maturation of this asset class."

Walton's transition into the BTR space further solidifies the conversation that this asset class is here to stay, said Steven Hensley, advisory manager for Zonda, a Newport Beach, California-based housing market research firm.

"With the land portfolio that Walton has, it gives them a head start in this competitive space as they will be able to put some of that land to work immediately."