Trepp: $3.83 billion of Denver multifamily debt sits on watchlists

$3.83 billion of Denver's securitized multifamily debt sat on servicer watchlists as of September, equal to 13.6% of the market's $28.24 billion balance, according to Trepp research published Oct. 20.

The watchlist share ranked sixth among the 50 largest U.S. metropolitan statistical areas. Delinquency on securitized multifamily debt in the Denver-Aurora-Centennial MSA was 1.13%, ranking 16th.

Watchlist placement is surveillance rather than default, and 98% of the watchlisted balance was current, Trepp reported. The designation means a loan is being monitored more closely for performance concerns. Trepp says the gap between a sixth-place watchlist ranking and a 16th-place delinquency ranking suggests Denver's apartment stress is showing up in loan surveillance before it shows up in delinquency figures.

The loans behind those designations are weaker than they were at underwriting. Weighted-average occupancy across the watchlist population has fallen to 86.5% from 94.3% at securitization, and weighted-average DSCR has declined to 1.19x from 1.47x.

$1.32 billion, or 34.5% of the watchlisted balance, is tied to loans with DSCR below 1.0x, Trepp reported. For those loans, net cash flow does not fully cover debt service, implying the shortfall is met by reserves, sponsor contributions or modified payments rather than property income.

The 2019 cohort carries $467.5 million of watchlisted debt, with weighted-average DSCR at 0.81x, down from 1.45x at securitization, and occupancy at 81.6% from 95%. The 2018 vintage's occupancy has fallen to 73.7% from 89.2%.

Newer loans are contributing heavily as well. The 2022 through 2025 vintages account for $1.69 billion, or 44% of Denver's total watchlisted multifamily balance. The 2023 cohort's DSCR has already dropped below 1.0x, to 0.93x from 1.28x. The 2020 vintage is the largest single cohort at $582.9 million, with DSCR at 1.10x from 1.54x and occupancy at 85.4% from 94.6%. The 2025 cohort's DSCR of 1.10x, from 1.23x, is the smallest decline among the four vintages Trepp details by cohort.

Servicer commentary points to the operating side. A keyword review of comments tied to roughly $958 million of watchlisted debt, about a quarter of the total, identified references to concessions, softer rents, higher vacancy and lower property income.