Morningstar DBRS Downgrades Two Classes of VMC Finance 2021-FL4 LLC

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on two classes of notes issued by VMC Finance 2021-FL4 LLC (the Issuer) as follows:

-- Class E to BB (high) (sf) from BBB (low) (sf)
-- Class G to C (sf) from CCC (sf)

Morningstar DBRS also confirmed its credit ratings on the remaining classes of notes as follows:

-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class F at CCC (sf)

All trends are Stable. With this credit rating action, the trend on Class E was changed to Stable from Negative. Class F and Class G have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings. In conjunction with this press release, Morningstar DBRS has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at info-DBRS@morningstar.com.

The credit rating downgrade to Class G reflects the increased Morningstar DBRS loss expectations for the transaction as four loans, representing 49.9% of the current trust balance are delinquent and in special servicing, including three loans, representing 33.6% of the current trust balance, which are Real Estate Owned (REO). All four loans are secured by office properties. While the resolution timeline for each loan may be extended given the lender's desire to stabilize the assets and increase property value prior to asset sales, Morningstar DBRS notes an extended timeline may result in increased costs and greater uncertainty. In its analysis of these four loans, Morningstar DBRS assumed each loan would ultimately resolve with a realized loss to the trust with individual loan loss severities ranging between approximately 20.0% to 90.0%. The projected cumulative losses are expected to erode the entire outstanding $65.3 million first loss piece, Class H, as well as a portion of Class G. As a result of the expected reduction in credit support to the transaction, Morningstar DBRS downgraded the credit rating of Class E as the bond no longer exhibits investment-grade credit characteristics.

As of March 2025 reporting, the transaction consists of nine loans, totaling $355.4 million. Since issuance, there has been collateral reduction of 61.2%, including an additional 9.9% since the previous Morningstar DBRS credit rating action in July 2024. In August 2024, the Wakefield loan (Prospectus ID#18, 2.0% of the current trust balance), was modified and extended to June 2026, which, also included a principal curtailment of $2.0 million and the loan was written down by $14.7 million. Additionally, the Columbus Center loan ($67.4 million), which was previously specially serviced, was paid in full with the March 2025 remittance, including the repayment of $3.6 million in interest shortfalls to Class F.

The transaction is subject to adverse selection as eight loans, representing 89.8% of the current trust balance are secured by office properties. The remaining loan is secured by a limited-service hotel property in Washington D.C. While the hotel is stabilized, the loan is not expected to be repaid until April 2026 as according to the collateral manager, the borrower provided notice to exercise the loan's final one-year maturity extension option.

The largest loan in special servicing, One Financial Plaza (Prospectus ID#4, 16.4% of the current trust balance), is secured by a 28-story office tower in Fort Lauderdale, Florida. The loan transferred to special servicing February 2024 with debt service paid through July 2024. According to the collateral manager, it is pursuing foreclosure with plans to take title to the property. The original business plan was to utilize $3.0 million of loan future funding to finance accretive leasing costs to increase occupancy and rental rates. As of the January 2025 rent roll, the property was 86.2% occupied, which compares favorably with the occupancy rate of 80.5% for Class A office properties in the Fort Lauderdale submarket at YE2024, according to Reis. While the occupancy rate is stable, the value of the property has declined significantly from closing as the March 2024 appraised value of $61.5 million, represents a 27.6% decline from the $85.0 million valuation at closing. The Q4 2024 update from the collateral manager notes a previous purchase and sale agreement was never executed and that capital expenditure (capex) items totaling $1.7 million needed to be addressed. Morningstar DBRS believes the lender will likely complete the capex work and monitor tenant rollover risk prior to listing the asset for sale, which could prolong the sale process. The current outstanding loan exposure totals $61.5 million, and in its analysis, Morningstar DBRS included additional forward-looking advances as well as a haircut to the March 2024 property valuation. The resulting loan loss severity was in excess of 20.0%.

The second largest loan in special servicing, River Forum (Prospectus ID#9, 14.4% of the current trust balance), is secured by a two-building, mid-rise office property in Portland, Oregon. The loan transferred to special servicing January 2024 with debt service paid through April 2024. The loan became REO in July 2024. The original business plan was to utilize $9.8 million of loan future funding to equally finance capex and accretive leasing costs to increase occupancy and rental rates. While $8.7 million of future funding was advanced to the borrower before the loan defaulted, it was unable to materially increase occupancy. As of the December 2024 rent roll, the property was 63.1% occupied, below the occupancy rate of 80.1% for office properties in the John's Landing/Barbur Boulevard submarket as of Q4 2024, according to Reis. The April 2024 appraised value of $40.6 million, represents a 29.9% decline from the $57.9 million valuation at closing. According to the Q4 2024 update from the collateral manager, the property has seen positive leasing momentum into 2025, and there are several capex projects that need to be addressed. Morningstar DBRS believes the lender will focus on completing necessary capex and focus on increasing the occupancy rate prior to marketing the property for sale with no definitive timetable known at this time. The current outstanding loan exposure totals $55.0 million, and in its analysis, Morningstar DBRS included additional forward-looking advances as well as a haircut to the March 2024 property valuation. The resulting loan loss severity was near 50.0%.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to our Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of our website.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at:
https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (April 9, 2025)/North American CMBS Insight Model v 1.3.0.0:
https://dbrs.morningstar.com/research/451739
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024):
https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024):
https://dbrs.morningstar.com/research/444064
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025):
https://dbrs.morningstar.com/research/450750
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024):
https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.