When we arrived at the Pagosa Springs Apartments — formerly Pagosa Springs Inn and Suites — a sizable construction crew was working hard in the cool October air, putting a new roof on the 98-unit apartment building.
Apparently, the building owners — who purchased the motel in November 2021 — had not expected the structure to need a new roof. As we learned, the building was full of surprises, for the team converting it from a motel into an apartment building.
We were standing outside the building, waiting for a tour of the project — a mix of Town staff, Town Council members, Town Planning Commission members, and a few interested members of the public. The Town had previously announced the tour as a ‘public meeting, to allow for the possibility that a quorum of this or that municipal board might show up. A quorum of board members, participating in a discussion of public business, typically requires that the gathering be ‘noticed’ and that the meeting be open to the public. As things turned out, neither the Council nor the Planning Commission fielded a quorum, but the event was nevertheless a ‘public’ tour.
Our host on the tour was Eric Boogaard, one of the two partners from Colorado Springs who have invested their money into this ambitious project.
Because the building was undergoing a ‘change of use’ — from a motel to apartments — many aspects of the interior had to be brought up to code. A totally new fire alarm system was going to be installed, we were told, even though the existing alarm system was fully functional.
These types of code upgrade requirements are very beneficial to fire alarm companies. Keeping the wheels of industry turning, so to speak.
The tour started on the bottom floor of the three story building, where the new framing for the smallish apartments still had no sheet rock attached, and the extensive (and expensive) new electrical wiring was still exposed. To convert the rooms from motel rooms into apartment units, new interior walls had to be built; a kitchen had to be added to each room; the bathrooms needed to be expanded in many cases. Each room required its own electrical breaker panel. Ceiling sprinklers needed to be upgraded.
I gathered from comments made during the tour that the motel’s previous owners — Chester and Margaret Pajak — had struggled to keep the motel profitable during the COVID crisis (and perhaps due partly to the unregulated and rather dramatic growth of Archuleta County’s vacation rental industry) and they were happy to sell the motel for $3.3 million.
To put that price tag into perspective, Mr. Boogaard and his partner Stuart Sloat, will ultimately end up with 98 apartments. If they had not needed to make any upgrades, that would put the cost per apartment at $34,000 per apartment. If indeed the prices listed on the Nuance Industries website are accurate…
…even a small, one-bedroom apartment is going to rent for $1,450 a month. Plus utilities.
According to my pocket calculator, that comes to $17,400 a year. At that rate, if Pagosa Springs Apartments LLC were able to lease all 98 units, they would be able to pay off their $3.3 million investment in two years.
During the tour it became clear, however, that the remodel has required a considerable investment, beyond the $3.3 million purchase price.
It also became clear that Mr. Boogaard did not want to tell us how much the units are actually going to rent for. That very question was posed to him at a couple of points in the tour, by Mayor Shari Pierce and by others, and Mr. Boogaard explained that the company has a competent property manager, and it will ultimately up to her to set the rental rates according to the Pagosa market, at the time the units become available. In fact, during the hour-long tour, I don’t recall Mr. Boogaard mentioning any dollar amount whatsoever, in relation to any question asked by the tour group. In fact, he seemed very talented at avoiding any mention of dollar amounts.
He did talk a bit about the ‘Missing Middle”, however, and described the Pagosa Springs Apartments as part of a solution to that issue.
As many of our Daily Post readers already know, the housing programs funded by the federal government are often aimed at low-income individuals and families — at people living near or below the federal ‘poverty line’. One such federally-subsidized housing project — Rose Mountain Townhomes, across from Town Hall on Hot Springs Boulevard — began moving families into their 34 apartment units earlier this year.
During the tour, Mr. Boogaard claimed that most new multi-family projects in Colorado, those that are privately financed and not subsidized by government funding, are — due to the high cost of construction and financing — aimed at wealthy renters, and are therefore furnished with luxury amenities. They are, in other words, the opposite of ‘affordable’.
That leaves investors like Pagosa Springs Apartment LLC to supply housing for individuals and families for the ‘Missing Middle’. People earning, say, $35,000 a year. Or maybe $50,000 a year. (Knowing that not many employees in Pagosa Springs earn $50,000 a year.)
If we look at the cozy 700-square-foot, two-bedroom unit in the image above — tentatively priced at $1,900 plus utilities — we can safely estimate that the annual rent would be in the $25,000 range. According to the Colorado Housing and Finance Administration, (CHFA) a working couple paying $25,000 a year for housing ought to have an annual income of $83,000.
There are, in fact, couples in Pagosa Springs with that kind of income. But I would hardly call them ‘The Middle’. Maybe, the “High End of the Middle”?
Another problem might be that about 80% of the units at the Pagosa Springs Apartments are one-bedroom, or studio, apartments. Only a few are two- or three-bedroom units. A single person renting a one-bedroom apartment for $1,450 needs an hourly wage — according to CHFA — of about $30 per hour.
That kind of wage is almost as rare, in Pagosa Springs, as an affordable dwelling unit.