Collateral value is only formally re-appraised every few years. Continuous monitoring re-values this asset each quarter, so credit risk surfaces as it develops — on a basis that traces to source and holds up under examination, rather than waiting for the next appraisal cycle.
Collateral is formally re-appraised roughly every three years; until then the books carry the origination value — a flat line. Continuous monitoring re-values each quarter, so a decline is reflected as it happens. The shaded region is the value change not yet recorded on the bank's books.
Value = NOI ÷ cap rate, so every move decomposes exactly into an income effect and a cap-rate effect.
Since enrollment, the monitored value has decreased 21.2%, from $116,599,122 to $91,880,108 across 6 quarterly re-valuations. Decomposing the move, 2.0% is attributable to the income effect (implied NOI moved from $6,587,850 to $6,716,436) and 23.2% to the cap-rate effect (the market yield moved from 5.65% to 7.31%). The dominant driver over the window was the movement in market capitalization rates.
With the loan balance fixed at $72,291,456, the loan-to-value ratio is now 79%. This is at or above the covenant threshold and warrants credit-committee attention.
The figures above are produced by the quarterly monitoring model, which re-values from observed market movement in cap rates and income. They are a screening view; a fresh, MAI-signed appraisal — with a new inspection and full three-approach reconciliation — is recommended before a credit decision, and automatically whenever a material-change or covenant alert fires.
Each quarter's change attributed to income vs. cap-rate movement.
| Quarter | Value | Δ | ← Income | ← Cap rate | Cap % | Implied NOI | LTV |
|---|---|---|---|---|---|---|---|
| Jun 2026 | $91.88M | -4.8% | +0.3% | -5.3% | 7.31% (+37) | $6.72M | 79% |
| Mar 2026 | $96.50M | -5.4% | +0.6% | -6.4% | 6.94% (+42) | $6.70M | 75% |
| Dec 2025 | $102.06M | -3.7% | +0.3% | -4.2% | 6.52% (+26) | $6.65M | 71% |
| Sep 2025 | $106.01M | -4.8% | +0.4% | -5.6% | 6.26% (+33) | $6.64M | 68% |
| Jun 2025 | $111.41M | -4.4% | +0.3% | -5.0% | 5.93% (+28) | $6.61M | 65% |
The inputs the monitoring model is carrying for this asset today.
The market yield applied to stabilized income. Re-estimated each quarter from observed transaction and survey evidence; a lower rate implies a higher value for the same income.
Derived as value × cap rate. Reflects the monitoring model's current view of stabilized income; the originating appraisal's NOI is shown for comparison below.
Stabilized income normalized to the subject's size for comparison against the competitive set.
Model estimate of stabilized occupancy, derived from the income path since enrollment. Not a fresh inspection.
Model estimate of in-place / market rent, trended from origination with the implied income growth.
Held at the originating appraisal's stabilized ratio absent evidence of a structural change in the expense load.
The 90% interval is wider than a fresh appraisal because monitoring re-values from market movement rather than a new inspection and full three-approach reconciliation.
Each enrolled asset is re-valued every quarter; a fresh signed appraisal is recommended when a material-change or covenant alert fires.
How each key input has moved since the originating appraisal (Jun 2026).
| Input | Origination | Today | Δ |
|---|---|---|---|
| Market value | $116,599,122 | $91,880,108 | ▼ $-24,719,014 |
| Capitalization rate | 5.65% | 7.31% | ▲ +166 bps |
| Net operating income | $8,900,000 | $6,716,436 | ▼ $-2,183,564 |
| Occupancy | 95% | 96% | ▲ +1% |
| Market rent | $54,664/unit | $55,358/unit | ▲ +$694/unit |
| Loan-to-value | 62% | 79% | ▲ +16.7% |
Submarket conditions from the originating appraisal that frame the movements above.
Within the Denver, CO multifamily residential market, the subject competes in its local submarket against properties of similar vintage, scale, and quality. This section analyzes the supply, demand, and pricing dynamics of that competitive set, which frame the comparable evidence relied upon in the approaches to value.
Supply & inventory. The competitive inventory consists of multifamily residential properties of comparable age and quality within the trade area. New supply in the submarket is elevated but tapering, and the development pipeline is manageable; it is not expected to materially alter the competitive balance over the projection period.
Demand & absorption. Demand is driven by the metro-level employment and demographic trends discussed above. Net absorption has been positive, and tours and leasing activity for well-located product remain steady.
Probability of default (PD) is modeled at 25.0%. PD rises with leverage and a deteriorating value trend; at the current LTV of 79% and a trailing trend of -21.2%, the model places the asset in a watch-risk band.
Loss given default (LGD) is 14%, reflecting the shortfall if the collateral were liquidated at a distressed CRE haircut (~32%) net of selling costs against the outstanding loan balance.
Expected credit loss (ECL) = PD × LGD × loan balance = 3.39% × $72,291,456 = $2,453,246. This feeds the CECL reserve. The model is illustrative; a production CECL model incorporates macro scenarios, borrower financials, and guarantor support.