KBRA Affirms All Ratings for VMC 2019-FL3
12 Sep 2025 | New York
KBRA affirms all of its outstanding ratings for VMC 2019-FL3, a CRE CLO transaction with limited post-closing acquisition ability. The affirmations reflect stability in KBRA's estimated losses for the remaining five assets since the last ratings change in September 2024. Of the five remaining assets, four (72.9% of the current pool balance) are specially serviced, REO assets. All five remaining loans have been identified as K-LOCs. However, the transaction has benefited from increased note subordination levels, which resulted in the trust paying down by $487.9 million (77.8% of the issuance balance).
The securitization includes an overcollateralization cash diversion test, which has been satisfied during each remittance date since closing. However, Classes E and F are accumulating interest deferrals at this time, as insufficient cash is being generated as a result of the specially serviced loans 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 the Class D Notes. The details of the loans are outlined below.
Bay Vista (largest, 28.4%, REO)
- The collateral consists of a 117,884 sf, mixed-use, office and retail condominium located in Seattle, Washington,approximately two miles northwest of the city’s CBD.
- KBRA maintains the asset's K-LOC designation due to its REO status; the title was taken in September 2024. The property has failed to meet the business plan’s expectation of maintaining a stabilized occupancy of 93.0% due to a decline in the office market sector. As of the May 2025 rent roll, the property was 44.9% leased, compared to 68.5% at last review and 93.0% at securitization. According to the manager’s most recent update, new property management and leasing agreements have been executed. The REO business plan includes $1.6 million for capital expenditures and $4.9 million for good-news leasing to shift the property to medical office from traditional office.
- An appraisal dated December 2023 indicates an as-is value of $28.0 million, down from $46.5 million at origination. KBRA’s analysis resulted in an estimated loss of $17.2 million (50.5% estimated loss severity). The loss is based on a KBRA liquidation value of $16.8 million ($142 per sf). The value is derived from a direct capitalization approach using a stabilized KNCF of $1.8 million, a capitalization rate of 9.50%, and a $2.7 million downward adjustment to account for income lost during the stabilization period.
Phoenix Corporate Tower (2nd largest, 27.1%, K-LOC)
- The loan is collateralized by a 457,878 sf, Class-A office property located in Phoenix, Arizona, approximately two miles north of the city’s CBD.
- KBRA maintains the loan's K-LOC designation due to the overall decline in the office market sector, as well as the loan's October 2025 final maturity. The sponsor’s business plan included spending approximately $3.3 million for various infrastructure and common area upgrades, a well as achieving a stabilized occupancy of 85.0%. As of the April 2025 rent roll, the property was 80.3% leased, compared to 78.8% at last review and 64.4% at closing. The capital improvement plan has been completed. According to the manager’s most recent update, the property has been listed for sale and a purchase and sale agreement has been executed. The loan received a three-month extension through October 2025 to facilitate the take-out financing. At this time, KBRA does not estimate a loss on this asset.
Lumber Exchange (3rd largest, 16.8%, REO)
- The collateral consists of a 225,102 sf, Class-B office property, located in Minneapolis, Minnesota, within the CBD.
- KBRA maintains the asset's K-LOC designation due to its REO status; the title was taken in June 2023. The property has failed to meet the business plan’s expectation of maintaining a stabilized occupancy of 90.2% due to a decline in the office market sector. As of the May 2025 rent roll, the asset was 24.2% leased, compared to 42.9% at last review and 54.0% at securitization. According to the manager’s most recent update, the entitlement process for a multifamily has been finalized. The asset has been listed for sale.
- KBRA’s analysis resulted in an estimated loss of $14.6 million (72.3% estimated loss severity) on the whole loan balance of $20.2 million. The whole loan includes the in-trust and outside participations. The loss is based on a KBRA liquidation value of $5.6 million ($25 per sf). The value is derived from a direct capitalization approach using a stabilized KNCF of $675,000, a capitalization rate of 9.50%, and a $1.5 million downward adjustment to account for income lost during the stabilization period.
Metro Denver Office Portfolio (4th largest, 14.4%, REO)
- The collateral currently consists of one 111,299 sf suburban office property located in the Denver, Colorado MSA. Since issuance, five properties, totaling 306,564 sf have been released from the portfolio and the whole loan has paid down by $28.6 million.
- KBRA maintains the asset's K-LOC designation due to its REO status; the title was taken in April 2024. The property has failed to meet the business plan’s expectation of achieving a stabilized occupancy of 91.5% due to a decline in the office market sector. As of the April 2025 rent roll, the remaining asset was 91.1% leased, compared to 63.2% at last review and 88.8% at securitization. According to the manager’s most recent update, the 105 Technology property was released and received sale proceeds of $3.0 million. The funds were utilized to fund TI/LCs at the remaining property, 400 Inverness. The TI/LCs included $2.5 million for the expansion of the largest tenant, to 46,850 sf from 17,375 sf. In addition to the expansion space, the tenant executed a 10-year renewal through June 2035. The property is expected to be listed for sale in 3Q 2025.
- An appraisal of 400 Inverness was dated May 2024, indicates an as-is value of $14.7 million, down from $21.3 million at origination. KBRA’s analysis resulted in an estimated loss of $3.9 million (21.1% estimated loss severity) on the whole loan balance of $18.3 million. The whole loan includes the in-trust and outside participations. The loss is based on a KBRA liquidation value of $14.4 million ($130 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.3 million and a capitalization rate of 9.50%.
1500 Portland Office (5th largest, 13.3%, REO)
- The collateral consists of a 68,392 sf, Class-A office property, located in Portland, Oregon, approximately two miles northeast of the CBD.
- KBRA maintains the asset's K-LOC designation due to its REO status; the title was taken in July 2025. The property has failed to meet the business plan’s expectation of achieving a stabilized occupancy of 90.0% due to a decline in the office market sector. As of the May 2025 rent roll, the property was 77.2% leased, compared to 74.5% at last review and 61.1% at securitization. The loan received a short term extension in April 2025 to October 2025. As part of the extension an $850,000 holdback was funded by the borrower and a full security packed was negotiated, which included a deed-in-lieu of foreclosure agreement. According to the manager’s most recent update, the borrower approached the servicer and requested a friendly transfer due to upcoming TI/LC costs, as well as the cost associated with a full roof replacement. Both the TI/LC and roof cost would be in excess of the holdback amount and the borrower is no longer willing to contribute equity into the property. The REO business plan includes continuing to lease the property occupancy to 90.0% and completing the roof replacement, while preparing the asset for sale.
- An appraisal dated December 2024 indicates an as-is value of $16.1 million, compared to $14.9 million at origination. KBRA’s analysis resulted in an estimated loss of $2.5 million (15.8% estimated loss severity).The loss is based on a KBRA liquidation value of $13.4 million ($196 per sf). The value is derived from a direct capitalization approach using a KNCF of $1.2 million and a capitalization rate of 9.50%.
Details concerning the ratings affirmations:
- Class D at BBB- (sf)
- Class E at B (sf)
- Class F 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.