Star Tribune - In Maple Grove and Plymouth, a new kind of housing is going up: Rentals

Star Tribune - In Maple Grove and Plymouth, a new kind of housing is going up: Rentals

With rows of tidy single-family houses set on carefully tended lawns, Mills Creek in Maple Grove looks like just like any other upscale suburban subdivision, except for one critical difference: There’s not a single resident pushing a mower, pulling weeds or painting the trim.

Every one of the 66 free-standing houses here is a rental that’s maintained by a management company — and it was built that way, making it the first of a kind in this area, but likely not the last. “People are busy, everyone works and no one has time to take care of things,” said Malinda Potter, the leasing manager at Mills Creek. “They don’t want to plow snow, or take care of the yard or fix things if they break.” While developers are pumping out thousands of high-rise apartments and side-by-side rental townhouses, investors are hoping to attract a new generation of renters who want maintenance- and mortgage-free living, but don’t want to share a wall, hall or garage with their neighbors.

Mills Creek is one of two single-family subdivisions in the Twin Cities being “built to rent,” a concept that’s making its way from Florida, Arizona and other Sun Belt states with large transient populations. The developer, Illinois-based Watermark Equity Group, says it’s testing the idea with Mills Creek and Beacon Ridge in Plymouth, a 37-unit project that’s about to break ground. The company is also pursuing sites in Nashville, Kansas City, Dallas and other cities. “Everyone can agree that there are certain benefits to living in a single-family home,” said Freddy Ellis, a managing partner and co-founder of Watermark. “At the same time there are certain benefits to living in a rental community.”

Since Mills Creek opened last year, 42 of the 66 planned units have been leased; construction is still underway on several of the houses and some of the amenities, including the putting green and pool. Rents range from $2,295 to $3,200 for two- to four-bedroom houses, which are anywhere from 1,200 to 2,038 square feet. Across the metro the average rent for a two-bedroom apartment is $1,353, according to Marquette Advisors, which tracks buildings with 10 or more units. On a per-square-foot basis, Mills Creek rents are a bit rich compared with most rentals in the suburbs but competitive with new luxury rental buildings in downtown Minneapolis and St. Paul. Like most traditional market-rate rental buildings, Mills Creek is decked out with resort-style amenities including a clubhouse, outdoor pool and a putting green. And in hopes of attracting pet owners who eschew long hallways and elevators, there’s a dog park and a private walking path rings the development.

When Ellis first started mulling the concept about five years ago, his target market was millennials saddled with student loans and other debt and retired baby boomers who are done with maintenance but don’t want to live in the city. “We couldn’t have been more right and we couldn’t have been more wrong,” he said. “We have every demographic you can imagine.” At Mills Creek that includes young professionals with children and still-working empty-nesters like Julie and Craig Kasa, who were among the first batch of residents to live at Mills Creek. The couple were ready to swap their laid-back life in the country but reluctant to embrace urban living full-throttle. For nearly two decades, they owned a big house on an exurban lake, but had grown weary of the isolation, the commute and the upkeep. “It was too big and too much work once the kids had grown and moved out on their own,” said Julie Kasa. “We wanted to ensure we could adapt to the different style of living.” That yearning for a more carefree lifestyle is nothing new in the Twin Cities, where subdivisions of owner-occupied houses maintained by an association have been popular for at least a couple of decades.

In those projects, owners maintain their homes but pay dues for upkeep on common spaces, including parks and trails, and amenities such as clubhouses and pools. The build-to-rent concept is an evolution of that idea, but a byproduct of the Great Recession, which created a new generation of renters by choice. The recession, subsequent housing crash and foreclosure crisis also enabled investors to snap up tens of thousands of deeply discounted houses that are now owned and managed as scattered-site rentals.

“The single-family rental market has exploded over the past few years,” said Ali Wolf, director of economic research for Meyers Research. She said that with home prices outpacing incomes, consumers are looking for a more affordable alternative. And with high land prices making for-sale deals more difficult to pencil out, builders are looking for ways to build more density.

“The single-family rental space offers a win-win to help address today’s affordability challenges,” Wolf said. “The hope is that Americans enjoy the luxuries of a single-family home, including a yard for the kids and dog, while they save for a down payment to buy a home themselves one day.”

Meyers Research says that construction of single-family houses intended for rental has doubled over the past 10 years across the United States, a trend that’s likely to continue as the stigma against renting wanes and housing affordability concerns increase. Steve LaTerra, managing director for Meyers Research, said that as the cost of building a house increases, many entry-level buyers will be priced out of the market and will forgo owning a new starter house in favor of a single-family rental. The trend hasn’t been without controversy, particularly in communities where large blocks of single-family homes have been bought by investors and turned into long-term rentals. More rentals in otherwise owner-occupied neighborhoods are seen by some as a destabilizing influence that could erode housing values.

That’s why several Twin Cities communities have considered implementing a variety of restrictions on the practice. In Brooklyn Center, where the number of single-family rentals nearly tripled from 2008 to 2018, a recent attempt to cap the number of such rentals at 30% fell short. Maple Grove has no such rules. The long-term success of the concept, and the willingness of communities to embrace the idea, also depends on how they’re managed and maintained. “Some developers have simply sold the homes to a large-scale investor who then farms out the management to a third-party operator,” said Mary Bujold, president of Maxfield Research in Minneapolis. “Some of those have come under fire for not taking care of the homes, raising rents dramatically and basically trying to just take the cash and run.”

Those concerns exist regardless of whether it’s a single-family home, apartments or duplexes, she said. “If you do not have appropriate management or have an owner that invests in and takes care of the property, it is a problem.” Herb Tousley, director of real estate programs at the University of St. Thomas, is optimistic that more built-to-rent projects will appear in the Twin Cities over the next couple of years, especially as millennials marry and have children but still struggle with student loan debt and the prospect of a job change or transfer. “A lot of companies have figured out that this is a business model that works,” he said.

Watermark’s Beacon Ridge project in Plymouth had already been platted for 37 single-family for-sale houses, not including the lot where they plan to build the clubhouse. Instead, the firm plans to build rentals, which will be larger and on larger lots than the Mills Creek project in Maple Grove.

For the Kasas, the decision to move to Mills Creek was more about lifestyle than economics. Julie Kasa said she’s already hosted a bridal shower and looks forward to hanging out with new friends at the pool and grilling area when it’s completed. They’ve already signed a two-year lease extension. “After all the years of owning a country lake home,” she said, “not having to worry about yard work, plowing and shoveling in the winter or any maintenance has been a relief.”


Single Family Rental Pt. II - The Beauty of Build-to-Rent

Single Family Rental Pt. II - The Beauty of Build-to-Rent

In Part One of our “Single-Family Rental” series, we introduced a fresh concept that has created a tremendous disruption within the residential housing market – Build to Rent Communities (B2R). Build-to-Rent is a nuance of the solidified single-family rental (SFR) asset class. Unlike the stereotypical single-family home, B2R communities provide residents with a newly constructed, free-standing homes that often feature Class-A amenities. These dynamic developments have already proven to resonate well across a plethora of demographics. This month, we will explore Build-to-Rent in greater depth by unpacking the origin, drivers to success, and consumer demographic.


Albert Einstein once said, “In the middle of difficulty lies opportunity.” As noted in last month’s blog, the Great Recession of 2008 left the housing market in an incredibly difficult place. Prices tanked, credit shriveled, and consumer demand and confidence all but disappeared. However, many wise investors saw the opportunity amidst the difficulty and acted swiftly. SF Rental homes proved to be a resilient residential real estate asset during that period, largely since rising foreclosures created great demand for rental homes.  Since then, the market has grown increasingly competitive for affordable housing. Within the last five years, real estate investment firms such as Blackstone, Tricon American Homes, and Invitation Homes (to name a few) have snatched up sizable shares of the current housing market – resulting in dips in home ownership that we haven’t seen since the 1960’s. Now, thirty-five percent of renters in the U.S. rent single-family homes according to the U.S Census Bureau, and nearly all of these homes are privately owned – with institutional money occupying a meager 2% of this market. [1]

Because real estate investment firms are bursting into the SF rental space and seeking to buy as many homes as possible, there has been a drastic influx in new construction rental homes to meet the demand for renting. Thus, B2R was born. Investors have turned to developers like AHV Communities, BB Living, and Christopher Todd Communities to expand their portfolios into condensed, easy-to-manage communities rather than the geographically scattered site portfolios.

What is B2R?

Separate from the traditional renting style of an apartment, a B2R home offers a unique, maintenance-free, custom living experience that rents like an apartment but lives like a home. With four walls to call your own, and no vertical neighbors, B2R offers all the privacies, luxuries, and accommodations of a custom-built single-family home, while also providing the convenience, flexibility and amenities of a best in class multi-family. John Burns Real Estate consulting group highlights that the current renter demographic focuses on experience and amenities. Their research on B2R communities shows the features commonly offered in these homes.

While these custom home finishes give B2R a significant edge over the standard Single-Family rental home, the true distinction is found in the communities’ amenities and conveniences.

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While these custom home finishes give B2R a significant edge over the standard Single-Family rental home, the true distinction is found in the communities’ amenities and conveniences.


Despite solid growth in the US Economy, home ownership rates still have not returned to pre-recessions levels. Research shows that this is for a myriad of reasons. We can see this across demographics from millennials to baby boomers.  


- Millennials are the generation with the most student debt in history. This has held back many from mortgage loan approvals and limited housing options – until B2R presented itself.

-   Because of this, millennials have chosen to appreciate amenities over ownership. With convenience, portability, and experience high on the list of millennial priorities, the full-service amenities offered in a B2R community are a dream come true.

-   Half of today’s millennials prefer to continue renting for as long as possible, as they enjoy travel, experience regular job changes, and seek adventure. [2]

Baby Boomers:

-   Many Baby Boomers suffered at the hands of Great Recession. With depleted retirement funds and a bad taste associated with home ownership, many boomers have opted for single-family rentals. [1]

-   B2R has been popular among baby boomers that, like millennials, enjoy travel and the flexibility of retirement, but still want their own home for hosting family and friends.

-    72% of today’s baby boomer renters prefer to keep renting for as long as possible – seeing no reason to leave the conveniences of renting. [2]

Therein lies the beauty of B2R: The amenities and luxuries of a detached single-family home without the burden of upkeep.

B2R In Action

With the B2R movement gaining traction among investors, developers, and consumers across the U.S., Watermark is proud to be considered one of the pioneers in the space. As Mills Creek, our 66-home B2R community located in Maple Grove, MN draws to completion at the end of this year, we can speak to the proven success of the concept. Mills Creek consists of 2, 3, and 4-bedroom homes on open floorplans, catering to a variety of lifestyles. Adorned with modern farmhouse aesthetics, timeless designs, elegant finishes, and individual yards, it is a first of its kind community in the Twin Cities. To truly provide an unrivaled living experience, resort-inspired community amenities include a clubhouse with a well-appointed fireside community room and fitness center, outdoor pool, patios, fire pits, grilling stations, putting green, a dog park and an artificial grass game lawn.

As residents continue to flood the B2R space, Watermark is eager to expand Mills Creek’s replicable success to the neighboring city of Plymouth, MN as well as  many other markets across the United States. Looking forward, we will examine B2R trends and offer our insights as to where Build to Rent is headed in the near future and beyond. Thank you for your interest in Watermark Equity Group and stay tuned for the next installment of our Single-Family Rental Series.

Berttucci, Mike 1.jpg

Mike Berttucci

Mike is the Finance Director of Watermark Equity Group. Since graduating Wheaton College (IL) with degrees in Business and Economics, Mike was active in community development and was a professor of business studies before joining Watermark in 2017.

The Single-Family Rental Series: Part I

The Single-Family Rental Series: Part I

As leadership mogul and former Navy Seal, Jocko Willink states in his award-winning podcast, “You must face history so you can learn from it.” Over the course of three months, Watermark will be giving an in-depth look at a concept that is taking the housing market by storm : Single-Family Build to Rent Communities (B2R). In order to fully understand the evolution of the housing market, we must first look to the past and identify forces that cultivated change and spurred innovation.

When the financial crisis of 2008 occurred, a proverbial shock wave hit the single-family market producing a fearfulness from both lenders and consumers, many could not or would not buy or lend. The housing market crash left banks with vacant homes on their balance sheets and potential homeowners without the credit standing needed to qualify for a mortgage. While this presented a significant problem to the vast majority, many institutional investors viewed this as the opportune time to capitalize on these distressed portfolios. With home values and interest rates plummeting, several investment firms began purchasing single-family homes with the intent to sell after the market volatility subsided. [1]

However, rather than wait out the storm with a portfolio of vacant, unused homes, several investment groups began to shift strategy. We began to see the emergence of investment groups whose primary strategy was to buy distressed single-family homes for the purpose of renting them out. In 2012, investment guru Warren Buffett was quoted in a CSNBC interview saying, “If I had a way of buying a couple hundred thousand single-family homes and if I had a way of managing them…I would load up on them.” [2] Single-family rental investment groups such as Tricon American Homes and Invitation Homes took heed of this advice and became the authority on single-family rental properties as a result of this market shift. Both beginning in 2012, Invitation Homes and Tricon American Homes have acquired nearly over 100,000 properties across 27 states in the U.S. collectively. As their portfolios expand, they are now offering full-service amenities, smart home features, and tasteful renovations – raising the standards and expectations of single-family renters across the U.S. [3]


The Single-Family Rental (SFR) concept presented itself as an income-generating alternative for investors as well as the perfect housing solution for those unable or not wanting to purchase a single-family home. As the market value of homes began to climb, and the economy bandaged up its wounds, this SFR asset class continued to emerge as a viable option for renters and investors alike. Nonetheless, even with this upward trend of single-family homes for rent, only 2% of single-family homes used as rentals are owned by institutional money. For comparison, 57% of Multi-Family units are owned by institutional money. [4] Further, as groups have added single family homes to their rental portfolio’s, several inefficiencies have come to the surface. One, is the fact that most single-family rental home portfolios are by nature, scattered and variant. This means, an investment firm might own 250 homes in a metropolitan area. Each of those homes might be anywhere from 10-60 minutes apart from each other. Not only the distance, but each of these houses might possess different types of mechanical systems and a variety of necessary maintenance. Again, compared to the world of Multi-Family assets, the scattered site single family rental home concept possesses a host of obstacles and inefficiencies. This trend and preference for detached rental units, coupled with the existing inefficiencies of building a scattered single-family rental portfolio is what eventually gave birth to a new asset – the Single-Family Build-to-Rent Community (B2R). [5]

In short, B2R Communities are comprised of Single-Family Homes exclusively built and designed for renting. With custom-build designs and full-service amenities offered to the renter, B2R provides numerous similarities to home ownership with minimal upkeep required. As the percentage of households in the market for renting soars to new heights, the stigma formerly associated with renting has had an inverse relationship. A higher percentage of households are now renting more than any time in the last 50 years. Notable drivers of this statistic are the exorbitant amounts of student loan debt saddled on millennials, debt or apprehension from Baby Boomers burned from the last market spiral, and the overall manageability and flexibility of leasing over buying. Here are some quick statistics on the renter’s market:

-          35% of U.S. renters rent single-family homes [6]

-          5% increase in the overall number of renters in the last 10 years [7]

-          8% increase in the number of Millennials renting/seeking affordable housing options [8]


As this market for B2R communities continues to flourish, Watermark is among the front-runners in the industry. With the already award-winning Mills Creek development experiencing remarkable demand, followed by the neighboring Beacon Ridge development undergoing construction this summer and property recently purchased in Denton, Texas, we are growing more and more excited about our future in B2R. Being a company built upon the foundation of relentless scrappiness and a winning mentality, we are noting economic trends and acting swiftly to meet consumer needs.

Over the course of the next three series installments, we will be unpacking the concept of B2R as well as highlighting market predictions and the direction in which this concept is heading. Thank you for your interest in Watermark Equity Group and stay tuned for the next installment of our Single-Family Rental Series.


Mike Berttucci

Mike is the Finance Director of Watermark Equity Group. Since graduating Wheaton College (IL) with degrees in Business and Economics, Mike was active in community development and was a professor of business studies before joining Watermark in 2017.

Mills Creek as Top Finalist in 2019 Minnesota Real Estate Awards

Mills Creek as Top Finalist in 2019 Minnesota Real Estate Awards

Maple Grove, MN - April 16, 2019

Watermark Equity Group is pleased to announce that one of their developments, Mills Creek, a single family home rental community has been awarded as a Top Finalist for best suburban multifamily in the state of Minnesota by the Minnesota Real Estate Journal (MREJ).  MREJ is the only standalone commercial real estate publication in Minnesota and has been covering the commercial real estate industry since 1984. Out of hundreds of nominated projects throughout Minnesota, the journal handpicks the top achieving communities for each year.  Watermark’s Mills Creek was selected for its innovation, performance, and design. Watermark Equity Group is grateful and excited to have received such a prestigious award.

Forth Worth project will turn shipping containers into apartments

Forth Worth project will turn shipping containers into apartments

More than 30,000 apartments are being built in Dallas-Fort Worth. But a small Fort Worth project may be the most unique rental community on the way in North Texas.

The 34-unit apartment project being built south of downtown Fort Worth will be constructed out of 76 steep shipping containers.

“It is truly a unique multifamily residential property,” said Steve Keys with Keywinn development, which is the general contractor. “The shipping container home residences will provide the Near south Side community a Class A, new construction living experience at an attainable price point, while satisfying a growing demand among the community for innovative, modern, and novelty living.

“Additionally, the use of new containers will allow for reduced construction costs and accelerated building timelines resulting in reduced, achievable rents.”

Called CoHo - short for container home - the development will have seven, 3-story buildings that will house studio, 2-bedroom and 3-bedroom rental units. Keys said most of the new containers used for the construction will be 40-footers.

The parking will be underground. It’s Key’s second shipping container project.

“It’s been an interesting niche market opportunity,” he said. I’m working on plans for another multi-family project using containers.”

Chicago-based watermark Properties is the developer of the one-of-a-kind rental community on West Terrell Avenue near Fort Worth’s medical district.

Fort Worth architect Matthijs Melchiors built a 3-story office complex on Evans Avenue near Interstate 35W. The Connex Office Park was constructed out of 40 shipping containers.

“It’s open, operating, has tenants,” Melchiors said.