TEXT - Fitch affirms Brookhaven at Lexington, Mass. revs

Fri Nov 16, 2012 2:39pm EST

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Nov 16 - Fitch Ratings has affirmed the 'A' rating on approximately $17
million Massachusetts Development Finance Agency (Brookhaven at Lexington)
outstanding bonds, including: 

-- $7.9 million fixed-rate first mortgage revenue bonds, series 2005A; 
-- $9.1 million variable-rate first mortgage revenue bonds, series 2005B. 

The Rating Outlook is Stable. 

SECURITY

Debt payments are secured by a pledge of the gross revenues of the obligated 
group, a first mortgage lien on the land and buildings, and a fully funded debt 
service reserve fund.

KEY RATING DRIVERS

EXCELLENT LIQUIDITY:  A primary credit strength is Brookhaven at Lexington's 
(Brookhaven) liquidity position.  At Sept. 30, 2012 (12-month interim), 
Brookhaven had $47.1 million in unrestricted cash and investments, which equates
to a very strong 1,029.4 days cash on hand, 296.4% cash to debt and 28.6x 
cushion ratio, all exceeding the respective 'A' category medians.

SOLID OPERATING PROFITABILITY: Brookhaven's profitability metrics are good with 
an operating ratio of 90.6% at Sept. 30, 2012 (12-month interim) and net 
adjusted operating margin (includes turnover entrance fees) of 34.5% during the 
same time period.  

MODERATE DEBT BURDEN:  Brookhaven's debt burden is manageable with maximum 
annual debt service (MADS) as a percent of revenue of 7% at Sept. 30, 2012, 
which is favorable compared to the 'A' category median of 8.7%.  MADS coverage 
during the same time period was a very strong 6.2x, reflecting good entrance fee
receipts in 2012.  Fiscal 2011 debt service coverage was much lower at 2.5x, but
still was in line with the 'A' category median of 2.7x.

GOOD OCCUPANCY RATES: Due to its location in a desired service area, Brookhaven 
has been able to maintain solid occupancy, over 90% in both its independent 
living units (ILUs) and assisted care units (ACUs), over the past four years.  
Occupancy in its skilled nursing facility has ranged from 61% - 90% over the 
same time period, reflecting its policy of direct admits only.   

CREDIT PROFILE

The 'A' rating reflects Brookhaven's very strong liquidity, solid operating 
profitability, manageable debt burden and continued strong demand for services. 
Brookhaven benefits from its strong and knowledgeable management team and its 
location in Lexington, MA, a suburb of Boston, with above average socioeconomic 
indicators. Brookhaven's market position is solid, despite a highly competitive 
service area, with occupancy in its ILU and ACU consistently above 95% and 90%, 
respectively. 

Brookhaven's liquidity indicators all well exceed Fitch's 'A' category medians 
and are viewed as a primary credit strength.  At Sept. 31, 2012 (12-month 
interim), Brookhaven had $47.1 million in unrestricted cash and investments, 
which equates to a very strong 1,029.4 days cash on hand, 296.4% cash to debt 
and 28.6x cushion ratio, which exceed Fitch's respective 'A' category medians of
494.8 days, 120.2% and 14.4x.   

Historical operating profitability has been strong and relatively consistent. In
2012 the community's operating ratio was 90.6%, indicative of better operational
profitability compared to the 'A' category median of 95.2%. Adjusted net 
operating margin (includes turnover entrance fees) was a very strong 34.5% in 
2012, exceeding the 'A' category median of 21.9%.  Net operating margin of 7.1% 
during the same time period was down from 11.3% in fiscal 2011, but still in 
line with the 'A' category median of 7.6%.

Total outstanding debt is approximately $17 million and is 46% underlying fixed 
rate and 54% underlying variable rate.  The series 2005B variable rate bonds are
backed by a letter of credit from Bank of America, which was recently renewed 
through March 2017. MADS of $1.643 million does not include any balloon 
payments, per the bond indenture.  MADS as a percent of fiscal 2012 revenue 
(interim results) was 7%, down from 7.3% in fiscal 2011 and favorable compared 
to the 'A' category median of 8.7%.  In fiscal 2012 (interim results) MADS 
coverage by turnover entrance fees was a very strong 6.2x, reflecting the strong
net entrance fee generation in fiscal 2012 ($7.3 million).  

The Stable Outlook reflects the expectation that Brookhaven will maintain strong
occupancy and solid debt service coverage. Brookhaven does not expect to issue 
additional debt in the near term. 

Brookhaven is a type A continuing care retirement community located on a 31-acre
site in Lexington, MA, about 11 miles northwest of Boston. The facility opened 
in 1989 and in 2006, Brookhaven completed a major expansion and renovation of 
its campus and now has 240 ILUs, 20 ACUs, and 49 SNFs.  In fiscal 2012 (interim 
results) Brookhaven had total revenues of $22.97 million. Brookhaven covenants 
to provide annual and quarterly disclosure statements.
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