NEW YORK--()--Fitch Ratings has affirmed the following Collier County, FL Health Facilities Authority bonds issued on behalf of The Moorings Park (Moorings Park) at 'A+':
--$11.8 million series 2000 bonds;
--$27 million series 2005 bonds;
--$34.8 million series 2008 bonds.
The Rating Outlook is Stable.
All three series of bonds are backed by direct pay letters of credit (LOCs) from JPMorgan Chase Bank (JPMorgan; rated 'A+/F1'; Stable Outlook by Fitch). The respective LOCs expire in 2014 and/or 2016.
The bonds are secured by a gross revenue pledge and mortgage pledge.
KEY RATING DRIVERS
EXCELLENT FINANCIAL PERFORMANCE: Moorings Park's excellent financial profile is highlighted by a strong liquidity position, consistent operating profitability, and robust debt service coverage metrics.
SOLID HISTORICAL OCCUPANCY: Independent living unit (ILU) occupancy reached a five-year high at 94.3% in fiscal 2012 (Dec. 31; unaudited), which was up from fiscal 2011's 91.6% despite the addition of 29 units. Overall, Fitch views Moorings Park's solid demand for services as a primary credit strength that helps sustain its excellent financial profile.
CAPITAL PROJECTS: In fiscal 2012, management completed its 29 independent living unit expansion, additional parking, and wellness center project on-time and on-budget. Management is now embarking on a new independent living campus project (totaling 96 ILUs built in three phases) four miles from Moorings Park's main campus with limited financial risk and upfront cost to the organization, which Fitch views favorably.
FAVORABLE SERVICE AREA CHARACTERISTICS: Moorings Park has a long operating history of serving a niche market of affluent residents in Naples, FL dating back to 1981. Additionally, Naples, FL. is viewed as a retirement destination, which enables Moorings Park to draw residents from beyond its local area.
POSITIVE RATING MOVEMENT UNLIKELY: Despite Moorings Park's excellent financial profile, positive rating movement is unlikely given its exposure as a single-site community.
RATING AFFIRMATION OF 'A+'
The rating affirmation of 'A+' is supported by Moorings Park's excellent financial profile and solid demand for services located in Naples, FL. In fiscal 2012 (unaudited), Moorings Park had $151.8 million in unrestricted cash and investments, which equated to 1,230.5 days cash on hand, 27x cushion ratio, and 154.5% cash to debt. These metrics compared favorably against Fitch's 'A' category medians of 494.8 days, 14.4x, and 120.2%, respectively. However, Fitch views Moorings Park's strong unrestricted liquidity position as necessary given its aggressive debt profile.
Through the same period, Moorings Park recorded $6 million in operating income, which led to a 97.7% operating ratio and 36.8% net operating margin-adjusted and marked another year of solid, consistent profitability. The organization's good profitability along with enhanced occupancy generated robust debt service coverage (turnover entrance fees only) of 5.9x, which compared favorably against Fitch's median of 2.7x. The strong financial performance continues to be driven by Moorings Park's long history in the market place of providing lifecare services to a very affluent population base. Over the past five years, occupancy has been solid averaging 91.6% in ILUs, 95% in assisted living units (ALU), and 91.2% in skilled nursing.
In October 2012, Moorings Park opened its new 29 ILU expansion project with no interruptions, which Fitch views favorably. Management is now undertaking plans for a new campus project, Moorings Park at Grey Oaks (Grey Oaks), which will consist of 96 new ILUs built in three separate 32-unit phases over three years. Management will only move forward with the second and third 32-unit phases if each preceding phase is successful. The project will be funded entirely by a local real estate developer and Moorings Park will only be responsible for marketing costs. During each construction phase, Moorings Park will have a goal of reaching 80% presales (26 units) before beginning construction. After successful fill-up of each unit phase, Moorings Park will become the owner of the new unit expansion with no associated debt. If the ILU expansion is successful, management will consider adding an assisted living/memory care space consisting of 16 ALUs and 48 memory support units. There could be additional debt associated with this project; however, since this project is very preliminary, Fitch will evaluate the capital plans and the impact to the rating, if any, when the plans are finalized.
STABLE RATING OUTLOOK
The Stable Rating Outlook reflects Fitch's expectation that Moorings Park will maintain its excellent financial profile and solid occupancy levels while embarking on the Grey Oaks project, which should have limited financial downside.
OUTSTANDING DEBT PROFILE
Total outstanding debt was $98.2 million as of Dec. 31, 2012. Fitch views Moorings Park's debt profile as aggressive with nearly 75% of outstanding debt in variable-rate demand bonds (VRDBs). Moorings Park's series 2000, 2005, and 2008 bonds are backed by JPMorgan LOCs and the organization also has a $24.7 million direct bank loan with JPMorgan with an initial term till 2020. Moorings Park has one floating- to fixed-rate swap for a notional amount of $28.7 million and there are no collateral requirements. Overall, Fitch believes Moorings Park's debt profile exposes the organization to counterparty, put, remarketing, and interest rate risk. However, Fitch believes Moorings Park's strong balance sheet mitigates this concern.
Moorings Park is a type-A continuing care retirement community located in Naples, FL. The community consists of 384 independent living units, 73 assisted living units, and 106 skilled nursing beds. In the year ended Dec. 31, 2012 (unaudited), Moorings Park had total revenues of approximately $62.8 million. Moorings Park covenants to provide annual and quarterly financial statements to bondholders.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
'Revenue-Supported Rating Criteria', June, 12, 2012.
'Not-for-Profit Continuing Care Retirement Communities Rating Criteria', July 12, 2012.
Applicable Criteria and Related Research:
Not-for-Profit Continuing Care Retirement Communities Rating Criteria