PHOTO: Student housing developed by Servitas at Florida International University’s Biscayne Bay campus.
Servitas Management Group (SMG) has established a reputable presence through years of industry experience in national student housing management through quality of service, development and strong partner relationships. We provide excellence and exceed our partner’s expectations, which is why we have maintained high occupancy rates and satisfaction reporting on all of our properties…
… Our unrelenting focus on national student housing management and the student experience enables us to continually update processes and operations, while refining our management and residence life services…
— from the Servitas website
Like Pagosa Springs Mayor Shari Pierce, and Town Manager Andrea Phillips, and the Town’s housing consultant Steve Clark, I have concerns about the relationship between the Town government and Dallas-based student housing developer Servitas, regarding preliminary plans to have Servitas construct 98 units of rather high-priced rental apartments and townhomes.
A year ago, in September 2021, when the Town published a Request for Proposals, the hope was to find a developer willing to build perhaps 60 rental dwelling units that would be affordable to working individuals and families. Market rental rates in Pagosa Springs had risen rapidly over the past five years, while we watched 1,200 residential dwelling units in the community converted into ‘STR’ mini-motels — thanks to internet services like Airbnb.com, VRBO.com and Booking.com, and an aggressive tourism marketing program by the tax-funded Pagosa Springs Area Tourism Board.
When we were shown the proposed rental rates that Servitas plans to charge for relatively small dwelling units on November 1, some of the rents… didn’t look all that attractive.
Up to $2,775 per month for a two-bedroom apartment? Up to $2,591 per month for a one-bedroom? Up to $2,160 per month for a studio apartment?
As Mayor Pierce stated during the presentation, “So, you said these are a screaming deal for Pagosa Springs — but living here and knowing our families here, I think there’s still going to be people who can’t afford these rents. And I think that’s where it’s up to the Town, to further subsidize the project…”
How many people, exactly, can afford these rents?
According to Colorado Housing and Finance Administration, a household should have an income of about $100,000 a year to afford the highest priced, two-bedroom units proposed by Servitas in the November 1 pro forma. But most of those two-bedroom units are only 870 square feet.
Is it slightly insane to believe that a family earning $100,000 a year would choose to live in an 870-square-foot apartment, with no front or back yard?
But that is what Servitas is apparently proposing to our Town leaders.
We will note that, according to the information found on their website, all the projects built previously by Servitas have been student housing structures, where — we might assume — many of the university students are completely supported by their parents, while living in smallish apartments. Or else, they are going deeply into debt, with student loans.
We also understand that the Town’s plan, all along, was to create a “P3” project — the type of “public private partnerships” that have become increasingly popular in America over the past 50 years, where a government essentially subsidizes a for-profit company to produce this or that infrastructure project with a (supposed) community benefit.
The Town could have chosen to work with a non-profit developer — and two of them submitted proposals last year for housing projects, but the Town picked Servitas instead.
Now, a year into the negotiations, the Town has already paid out $458,000 to Servitas, without much indication that we are close to a viable project. Here’s how the Town summarized the current situation in the November 1 agenda packet:
At its meeting on Oct. 19, staff provided an update on the Town’s workforce housing project. Council decided to bring in Servitas and SB Clark (Steve Clark and Monica Clark), the Town’s financial consultants on the project, to discuss the various moving pieces to this project.
A draft proforma has been prepared by Servitas for consideration by the Town. This will be discussed during the meeting. There are a lot of “levers” or assumptions that will need to be fleshed out with the developer, town consultants and the Council in order to finalize. These include, but are not limited to:
- rental unit mix and number of units
- rental amounts and how much of a gap there is between what Council wants to charge for rents and the rental amounts needed to cover costs
- project cost and value engineering needed to bring costs down
- assumptions of vacancy rates
- interest rates and financing options
- availability of grant funds
The Pre Development Agreement with Servitas will need to be amended and approved by Town Council in order to move forward with the new project scope. The draft is attached. Staff and Council may have questions and items to discuss with Servitas before this is ready for approval. The scope of the project, project costs, and the schedule have changed considerably since the original PDA was executed with this P3 developer. The developer’s fee has grown and estimated pre-development costs have also increased with the new project scope.
FISCAL IMPACT:
Significant long term financial impact to town. Due to change in scope and focus on sites, the Town has paid $458k in predevelopment fees and costs for the abandoned S. 8th St. site to Servitas. The Town Council directed the purchase of a new site at the Enclave at a purchase price of $550,000.
During the November 1 Council discussion, staff noted that the Colorado legislature has earmarked new funding for workforce housing projects. The staff announced its intention to apply for those grants, while conceding that the competition for those new grant funds will be intense — considering the number of Colorado communities now struggling with their own housing crises.
One thing that surprised me about the Servitas proposal:
It appeared to me that Servitas had arranged the project so that all of the financial risk rested on the shoulders of the community’s taxpayers, and none on Servitas.
And it also seemed that the risk was considerable.
Bill Hudson began sharing his opinions in the Pagosa Daily Post in 2004 and can’t seem to break the habit. He claims that, in Pagosa Springs, opinions are like pickup trucks: everybody has one.