TEXT - Fitch affirms Brookhaven at Lexington, Mass. revs
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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