The Rating Outlook remains Positive.
The bonds are secured by a gross revenue pledge, first mortgage, and debt service reserve fund.
KEY RATING DRIVERS
POSITIVE OUTLOOK MAINTAINED: VOTI had a good cash flow year in 2013, which helped increase unrestricted cash and investments by 19%. However, an upgrade is precluded at this time as VOTI's liquidity metrics are still on the low end of the 'A' rating category. The maintenance of the Positive Outlook reflects Fitch's belief that VOTI can continue to grow its unrestricted liquidity over the next year, which should bring its metrics more in line with the 'A' medians.
OPERATING PERFORMANCE REMAINS SOLID: Three-month 2014 interim results show VOTI with an 84.3% operating ratio, a 29.7% net operating margin - adjusted, and 2.7x maximum annual debt service (MADS) coverage, all consistent with prior year results.
HIGH OCCUPANCY: VOTI continues to maintain very strong occupancy across all levels of care - 97.2% for independent living units (ILU), 97% for assisted living units (ALU) and 99.5% in skilled
nursing as of
MARKET POSITION A CREDIT STRENGTH: VOTI benefits from its location in
CONSERVATIVE FINANCIAL PROFILE: VOTI has all fixed-rate debt and the majority of its investments are in cash and fixed income.
VOTI operates a continuing care retirement community located in
Solid Financial Profile
The affirmation and Positive Outlook reflect VOTI's sound operating performance, liquidity growth, strong occupancy levels, and solid debt service coverage.
VOTI finished 2013 with an 86.4% operation ratio and a 31% net operating margin-adjusted, both above 'BBB' and 'A' category medians and stronger than the prior three audited years. VOTI has averaged an 89.5% operating ratio and a 29% net operating margin-adjusted over the last four audited years. The strong operating performance is supported by high occupancy across all levels of care, with none of VOTI's year-end occupancy levels falling below 95% over the last four audited years. In addition, VOTI has managed expenses well and its operating performance generally exceeds budget.
Debt service coverage has been strong as well, especially revenue-only coverage, which has averaged 1.4x over the last four audited years and stood at 1.8x in the three-month 2014 interim period. The 'A' median for revenue-only coverage is 1.2x.
Unrestricted cash and investments have steadily grown over the four-year historical period. At
Solid Market Position
VOTI is positioned well in its service area with manageable competition, moderate entrance fees relative to the local real estate market, and solid demand for services. For its Type 'A' contract, VOTI's highest entrance fee is
In its last rating review, Fitch was concerned about the area's housing market, but stress on the housing market has eased since then. A Fitch new issue report on
VOTI has steadily invested in its plant, which keeps its campus marketable. Over the last four audited years VOTI's capital spending has averaged 141.1% of depreciation, which is above the 'A' category median of 104.4%. Fitch expects capital spending to be closer to depreciation over the next two years, with the biggest project an elevator expansion project in one of its ILU buildings, which is expected to cost approximately
VOTI covenants to provide audits within 150 days of year end, quarterly statements within 45 days of quarter end, including occupancy statistics, annual budget, and any notice of a material event to EMMA.
Additional information is available at 'www.fitchratings.com'.
--'Rating Guidelines for Nonprofit Continuing Care Retirement Communities,'
Rating Guidelines for Nonprofit Continuing Care Retirement Communities
Source: Fitch Ratings
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