Denver-based Atlas Real Estate and San Francisco-based DivcoWest have formed a joint venture that plans to invest $250 million of equity in single-family homes as rentals throughout the Western United States.
The joint venture will layer on debt so that it’s able to deploy $1 billion into acquiring and renovating homes in high-growth states, including Colorado, Arizona, Idaho, Nevada and Utah where Atlas currently manages more than 4,200 units. The joint venture plans to raise more funds to invest in single-family rental properties in the future.
“We’re very excited about the opportunity for a number of reasons,” said Vince Deorio, who joined Atlas in December as vice president to fuel the company’s continued growth. “We’re spread out across five markets, so we’ll be able to acquire responsibly.”
Atlas is a full-service real estate company specializing in investment services, property management and institutional acquisitions. The company handles more than $1 billion real estate transactions annually.
DivcoWest is a real estate investment firm known for long-standing relationships and experience in markets where innovation thrives.
Over the next two years, Atlas and DivcoWest plan to acquire 2,500 homes. In addition to buying existing homes, the joint venture will acquire new homes from builders who want to open up some of their neighborhoods to rental properties, Deorio said. In Colorado, Atlas and DivcoWest likely will pay between $400,000 and $500,000 for a single-family rental home.
“Homeownership is becoming more challenging with supply constraints across the country,” he said. “Potential home owners are not able to move into the neighborhoods they want to or they can’t afford a downpayment. The supply constraints across the country are a concern.”
There are a number of reasons the inventory of homes for sale is low, said Lon Welsh, managing broker of Denver-based Your Castle Real Estate. The lower end of the market has less inventory than pricier homes.
“First-time sellers have been reluctant to trade up,” Welsh said.
But there are other factors at play. For one, many people have been uncomfortable having strangers walk through their homes during the coronavirus pandemic. Then there are the people who have lost their jobs and their friends and families who watched it happen and are nervous about their own employment.
But with more and more people getting vaccinated and job prospects improving, more homes are being listed, and Welsh said he expects inventory to improve by fall.
“People are maybe getting more confident listing their homes now,” he said.
The influx of people to the state also has had an impact on the market. Over the past two decades, 1.5 million people have moved to Colorado. Metro Denver is expected to add another 1.1 million people, according to the Colorado State Demography Office.
People relocate to Colorado for a variety of reasons. The outdoor active lifestyle is a big draw as the relative ease of finding a job as more companies move and expand in the state. And for some, if you can work from anywhere, why not make it a place you love.
People moving to Colorado also find that the cost of housing is relatively low compared to the East and West coasts. For example, while the median price for a single-family home was up 15 percent in March to $560,000 in metro Denver, California’s median home price for the same month was $758,990, according to Norada Real Estate Investments.
“The biggest challenge is in inventory and affordability,” said Todd Moir, regional marketing manager of Coldwell Banker. “We’re starting to get sprawl. People are moving to towns like Franktown and having to drive upwards of an hour so they can buy a house.”