KBRA Affirms All Ratings for GACM 2019-FL1
5 Jun 2025 | New York
KBRA affirms all of its outstanding ratings for GACM 2019-FL1, a $90.8 million CRE CLO transaction with an 18-month reinvestment period, which ended in November 2020. The affirmations reflect stability in KBRA’s estimated losses for the remaining three loans since our last rating changes in June 2024. The three remaining loans are K-LOCs with estimated losses and include two (55.5% of the current pool balance) specially serviced loans. The specially serviced loans are comprised of one loan in foreclosure (31.0%) and one delinquent (24.5%) loan. However, the transaction has benefited from increased note subordination levels, which resulted in the trust paying down by $534.1 million (85.5% of the issuance balance).
The securitization includes an overcollateralization cash diversion test and an interest coverage test, both of which have been satisfied during each remittance date since closing. However, Class G is accumulating interest deferrals at this time, as insufficient cash is being generated as a result of one loan deferring monthly interest payments. If additional loans were to defer monthly interest payments, the PIKable feature could shift vertically in the capital structure to impact additional classes. The details of the loans are outlined below.
Sunset Yards (largest, 44.5%, K-LOC, Current)
- The loan is collateralized by a 192,174 sf, Class-A office property located in the Sunset Park neighborhood of Brooklyn, New York. The loan was contributed to the trust as a ramp up mortgage asset in October 2019.
- KBRA maintains the loan’s K-LOC designation due to challenges in the ability of the asset to meet business plan expectations due to a decline in the office market sector. The loan was modified in July 2024 to utilize the final extension option and extend the final maturity to July 2025. As part of the modification, the loan incurred a 25bps extension fee and the loan spread was increased by 25bps to 3.31%
- The sponsor’s business plan was to utilize $7.8 million to lease up the vacant property to a stabilized level of 88.0%. As of the December 2024 rent roll, the property was 57.8% leased, compared to 36.8% at last review. The increase in occupancy is attributable to Friends at Prospect School, the largest tenant, executed a lease for an additional 41,000 sf, coterminous with its existing July 2053 lease expiration. The tenant now represents 45.9% of collateral square footage and 74.4% of total base rent. According to the manager’s most recent update, the sponsor has begun marketing the asset for sale and expects to receive offers in June 2025, prior to the loan’s maturity.
- As of May 2025, the loan is current on payments and not specially serviced. However, in the event of a default, KBRA estimates that it could experience a loss given default of $18.2 million (37.9% estimated loss severity) on the whole loan balance of $48.4 million. The whole loan includes the in-trust participation, outside participation, and unfunded future funding. The loss is based on a KBRA liquidation value of $30.2 million ($157 per sf). The value is derived from a direct capitalization approach using a stabilized KNCF of $2.3 million and a capitalization rate of 7.50%.
7600 Leesburg Pike (2nd largest, 31.0%, K-LOC, Foreclosure)
- The collateral consists of a 218,758 sf, Class-B suburban office complex located in Falls Church, Virginia, approximately 10 miles west of Washington, D.C. The collateral contains 10.16-acres.
- KBRA identified the loan as a K-LOC due to the loan’s foreclosure status. The loan transferred to the special servicer in July 2023 following maturity default and was subsequently foreclosed on. The property has failed to meet the business plan expectation of achieving a stabilized occupancy of 81.7% due to a decline in the office market sector. As of the December 2024 rent roll, the property is 24.2% leased, compared to 26.5% at last review and 52.0% at securitization.
- According to the manager’s most recent update, the property is located within a Limited Office District with the ability to accommodate five to eight residential units per acre and within the Fairfax County Comprehensive Plan to increase multifamily zoning. Following the completion of a highest and best-use analysis, a national home builder entered into a Purchase and Sale agreement for the property based upon the residential redevelopment opportunity. Once the rezoning of the property is completed, which is expected in late 2025, the purchaser will close escrow.
- KBRA’s analysis resulted in an estimated loss of $15.7 million (55.9% estimated loss severity) on the whole loan balance of $28.1 million. The whole loan includes the in-trust participation only. The loss is based on a KBRA liquidation value of $12.4 million ($57 per sf). The value is derived from a haircut applied to the highest and best-use analysis, as converted to multifamily.
DoubleTree Atlanta Perimeter (3rd largest, 24.5%, K-LOC, 90+ days delinquent)
- The loan is collateralized by a 250-key, full-service hotel located in Atlanta, Georgia, approximately 14 miles north of the city’s CBD.
- KBRA maintains the loan’s K-LOC designation due to the loan’s 90+ days delinquency. The loan transferred to the special servicer in August 2023 following maturity default. The property has failed to meet the business plan expectation of achieving a stabilized RevPAR of $105. As of March 2025, the property reported an occupancy and ADR of 46.9% and $103, respectively, resulting in a RevPAR of $48.
- According to the manager’s most recent update, a receiver has been appointed and is working to stabilize operations, while simultaneously marketing the property for sale.
- An appraisal dated September 2024 indicates an as-is value of $16.0 million, down from $35.5 million at origination. KBRA’s analysis resulted in an estimated loss of $10.4 million (47.1% estimated loss severity) on the whole loan balance of $22.2 million. The whole loan includes the in-trust participation only. The loss is based on a KBRA liquidation value of $12.0 million ($48,000 per key). The value is derived from a haircut applied to the most recent appraisal.
Details concerning the rating affirmations:
- Class E at BBB- (sf)
- Class F at B (sf)
- Class G at CCC (sf)
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and deferred interest on the rated notes. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as, the magnitude and extent of interest deferrals, if any, on the notes.
To access ratings and relevant documents, click here.