Fitch Affs New Jersey Economic Development Auth (Crane's Mill) Bonds at 'BBB-'; Outlook Stable

NEW YORK--(Business Wire)--
Fitch Ratings affirms the following New Jersey Economic Development Authority
(Crane's Mill Project) bonds at 'BBB-':

--$16.2 million fixed-rate revenue bonds, series 2008A;

--$22.4 million variable-rate revenue bonds, series 2008B*;

--$14.5 million fixed-rate revenue refunding bonds, series 2005A;

--$14.5 million variable-rate revenue refunding bonds, series 2005B*.

*Underlying ratings. Variable rate bonds are backed by letters of credit (LOCs)
from TD Bank, N.A. (rated 'AA-/F1+' by Fitch).

The Rating Outlook is Stable.

The 'BBB-' rating is based on Lutheran Social Ministries at Crane's Mill's
(Crane's Mill) excellent occupancy, strong operating performance, and sound
liquidity relative to expenses. Through May 31, 2009, Crane's Mill's occupancy
remains solid with occupancy in the independent living units (ILUs) at 94%, the
assisted living units (ALUs) at 85%, and skill nursing facility (SNF) at 97%.
The high occupancy is consistent with the last three years and continues to
support strong operating results, which has also been excellent over the last
three years. In 2008, Crane's recorded a 93.1% operating ratio (excluding invest
income) and a 9.8% excess margin, strong relative to the 'BBB' category. Crane's
Mill had 472 days cash on hand (DCOH), based on $22.5 million in unrestricted
cash and investments as of May 31, 2009. While this is a decline from year end
2008, when DCOH stood at 513 days, it is still strong liquidity relative to
expenses for the 'BBB' category. Crane's Mill investment portfolio is fairly
conservative with no alternative or hedge fund exposure and less than 30% of its
investments in equities.

Fitch's main credit concerns are presales and fill-up for Crane's Mill's current
expansion project. The project, which includes the building of 66 independent
living units (ILUs) and 10 cottages, and the renovation of 12 existing ALUs and
the adding of six ALUs, is expected to be completed by January 2010, with
fill-up to start in March. Crane's Mill met its presale requirement of 60% in
June 2008 to be able to begin construction; however, since that time sales have
been flat with the presale list currently standing at 65%, with 49 out of a
total of 76 units pre-sold. Along with the flat sales, Fitch is also concerned
about Crane's Mill's ability to convert the 49 members on the presale list to
residents given the continued downturn in both the general economy and the
housing markets. While members of the list have put down a deposit of the lesser
of $25,000 or 10% of the unit price, this amount is fully refundable should
prospective residents decide not to convert and move in. If Crane's Mill
experiences difficulties in filling up the new units, either through a lack of
new sales or lower than expected conversion of current depositors, negative
rating pressure could occur.

Mitigating these risks are Crane's Mill continued strong occupancy though the
current difficult economy, the significant number of members of the list, 41 of
49, who requested customization of units (a positive indicator of the likelihood
of conversion since payments for customizations are non-refundable), and the
2008B bonds not being including in debt covenant calculations until either 80%
occupancy or four years after bond issuance, June 2012. Actual debt service
coverage in 2008 of $2.2 million was adequate at 1.8 times (x), while maximum
annual debt service coverage, $4.1 million, which includes the 2008B bonds,
would have dropped coverage to 1.0x.

A second credit concern over the near term is Crane's Mill conversion of its
residency contracts from a predominately type 'A' contract to a predominately
type 'B' contract. As units turnover during this transition, Crane's Mill will
be refunding type 'A' entrance fees which will be higher than the type 'B'
entrance fees they will be receiving from the incoming residents. This
differential will suppress operating results in the near-term and stress
coverage figures, but in the medium- to long-term it should lower Crane's Mill's
overall risk profile as health care liability should be diminished.

The Stable Outlook reflects Crane's Mill's solid occupancy and strong
operations, which should continue over the near-term, as well as Crane's Mill's
ability to fill the new units over the next two years.

Crane's Mill has two series of variable rate demand bonds and two associated
swaps that synthetically fix the variable rate debt. The variable rate debt is
supported by LOCs from TD Bank, N.A. The LOCs expire in 2013. Crane's Mill plans
to refund one series of the variable rate debt with entrance fees from the new
ILUs, and has adequate liquidity to cover a put on the other series. Bank bond
provisions are for ongoing interest payments with the principal due upon the
expiration of the LOC. However, to date the bonds have been regularly
remarketed. Both swaps have no collateral posting requirements and will expire
over the next few years, one in 2010, the other in 2013. The mark-to-market on
the swaps as of Dec. 31, 2008 was (-$831,000).

Located in West Caldwell, NJ, Crane's Mill is a type A and type B continuing
care retirement community consisting of 205 ILUs, 60 assisted living units, and
66 nursing beds. In fiscal 2008, Crane's Mill had total revenues of $20.8
million. Crane's Mill has covenanted to provide to the Nationally Recognized
Municipal Securities Information Repositories (NRMSIRs) annual audited financial
statements within 120 days of its fiscal year end and un-audited financial
statements within 45 days of each fiscal quarter.

Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.

Fitch Ratings
Gary Sokolow, +1-212-908-9186 (New York)
Jim Mitchell, +1-813-222-1395 (Tampa)
Media Relations:
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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