2020Q1: Denver’s Largest Landlord Discuss COVID-19 Delinquencies

2020Q1 Central Denver Market Report

Everyone has been asking us, “how has COVID-19 impacted other apartment operators?” Further, how are the leaders of Denver’s apartment industry navigating this pandemic?

Independent apartment owners have expressed sincere concerns during hundreds of 1-on-1 conversations we’ve had since March 2020. Topics like rent deferrals, delinquent tenants, rent strikes, and the lasting effects of unemployment are starting to affect the real estate industry.

BusinessDen, an online media outlet for local business news, arranged a panel of some of the brightest minds in the apartment industry to answer these questions on May 14th. Two of our favorite thought leaders were featured on the panel: Bobby Hutchinson of Red Peak and Zvi Rudawsky of Wheelhouse/Boutique.

Bobby Hutchinson serves as the Chief Investment Officer of Red Peak which owns and manages a 3,200-unit portfolio across 50 buildings, many of which are located in Central Denver. Hutchinson acknowledged that “most owners were worried about rent collections at the start of the pandemic” and that “we really didn’t know what to expect.”

Red Peak shared that their portfolio was 2.5% delinquent at the end of April 2020; compared to a normal delinquency rate of less than 1%. As of the panel discussion on May 14th, Red Peak’s delinquency was up to 7.4%. An interesting parallel showed that April’s mid-month delinquency was actually higher 7.9% before settling down to a more palatable 2.5% as mentioned above. The moral of the story… delinquent tenants were finding a way to make payments. Bobby attributed this improvement to two factors: 1) educating tenants about government programs available to them and 2) inventing an internal program that enabled tenants to pay throughout the month instead of the traditional “pay at the beginning of the month” standard.

Zvi Rudawsky serves as the Chief Executive Officer of Wheelhouse and Boutique Apartments. The two “sister-brands” operates 4,200-units as a fee-based, 3rd party manager of independent ownership groups, like you.

Zvi reported their collections in a variety of helpful formats. First, Wheelhouse and Boutique tracked delinquency rates across the entire portfolio at the exact same time of each month since the pandemic arrived in Colorado. Delinquency rose across the portfolio for three consecutive months: 6.43% on March 13th, 10.23% on April 13th, and 11.58% on May 13th.

Next, Rudawsky categorized their portfolio into three distinct groups for May 2020:

  • Class A (newer, extensive renovation)
  • Class B (some renovation)
  • Class C (average condition)

Delinquencies as of May 13th, class A 3.47%; class B 6.72%; class C 22.85%

We contacted Rudawski in mid-June to continue the story. As of Friday June 12th, they had a portfolio delinquency rate of 14.33% and after weekend payments the delinquency rate was 13.83% on Monday June 15th. Zvi further commented about the strength of their Central Denver and Capitol Hill Portfolio which totals 873 units and posted a 5.66% delinquency rate on June 15th. As of this writing, 1.66% of the 5.66% delinquent Cap Hill tenants agreed to a deferred payment schedule.

Zvi shared that his concern is that the delinquency gap has existed from March to June and that the gap is widening. Another concern is that while some tenants are diligently working to cure their delinquencies, other tenants are not. A further and deeper concern is that unemployment support and economic stimulus from the CARES Act are both running out. Finally, it appears that retail businesses, which employ many of Denver’s tenants, are opening back up at limited capacities, but how are those businesses going to fare when PPP runs out and revenue doesn’t return to full operation?

Our viewpoint is that the rental market is likely to get worse before it gets better. The difficult conundrum for most landlords is there are no ramifications for non-payment as the political climate is pushing hard for a variety of extended eviction moratoriums. Zvi finished by saying, “all we can do right now is send a nice letter asking our tenants to honor their original agreement.”

The objective of the panel was to check the pulse of the management and development side of the apartment business. BusinessDen graciously allowed us to simulcast the content on the Calibrate Real Estate podcast. This particular storyline was just one of several that were discussed in a 50-minute long interview. You can find the full-length podcast on our website and Apple Podcasts by searching: Episode 125 Calibrate Podcast Denver Landlords.

By: Kyle Malnati


Calibrate Real Estate
2425 S. Colorado Blvd. #250, Denver, CO 80222