SAN FRANCISCO--(BUSINESS WIRE)--
Fitch Ratings has affirmed the 'BBB' rating on the following bonds
issued by the Fairfax County Economic Development Authority, VA and
Industrial Development Authority of the City of Alexandria, VA (on
behalf of Goodwin House Incorporated):
--$143 million series 2007;
--$25 million series 2005.
The Rating Outlook is Stable.
The 'BBB' rating pertaining to the series 2005 variable rate demand
bonds (VRDBs) is an underlying rating. The series 2005 bonds are
supported by a letter of credit (LOC) from Wells Fargo Bank, N.A. (rated
'AA-/F1+'; Stable Outlook by Fitch) that expires in July 2016.
The series 2007 bonds are secured by mortgages on Goodwin House
Incorporated's (Goodwin House) real estate, a gross receipts pledge, and
a debt service reserve fund. The series 2005 bonds are equally secured
by Goodwin House's real estate and gross receipts pledge, and are also
secured by a LOC from Wells Fargo Bank, N.A.
KEY RATING DRIVERS
STRONG BALANCE SHEET: Goodwin House continues to have strong balance
sheet metrics for its rating level. As of March 31, 2014 (six-months;
unaudited), unrestricted cash and investments totaled $136.9 million,
which translated into 941.6 days cash on hand (DCOH), 13.1x cushion
ratio, and 82.7% cash to debt, which compares favorably against Fitch's
'BBB' medians of 371.3 DCOH, 6.9x, and 58.9%, respectively.
SOLID DEMAND CHARACTERISTICS: Goodwin House maintains solid occupancy
across all levels of care. In fiscal 2013 (Sept. 30 year-end; audited),
independent living unit (ILU) occupancy was a high 96.4%, assisted
living unit (ALU) occupancy was 95%, and skilled nursing facilities
(SNF) occupancy was 95%. Fitch continues to believe that Goodwin House's
solid demand is a key credit strength which supports the organization's
successful financial profile.
GOOD SERVICE AREA: Operating in Northern Virginia, Goodwin House's
markets display good service area characteristics such as above average
wealth indicators, and relatively stable housing markets - all of which
support Goodwin's strong demand.
LARGE CAPITAL PLANS: Management has been planning for a significant
repositioning project for the last several years at its Goodwin
House-Alexandria campus, which is now expected to commence over the next
two years. The preliminary cost of the project is expected to be
approximately $55 million-$60 million, which will be funded by debt and
equity. Fitch will continue to monitor Goodwin House's capital plans and
review debt plans at the time of issuance.
GOOD DEBT SERVICE COVERAGE: Maximum annual debt service (MADS; $10.4
million) coverage (including turnover entrance fees only) was a solid
2.2x in fiscal 2013, which compared favorably against Fitch's 'BBB'
category median 1.9x. However, there is a reliance on entrance fees for
debt service coverage, fairly typical for Type A facilities, which
results in a low revenue-only coverage of 0.4x in 2013, below the median
of 0.9x. Additionally, Fitch believes Goodwin House has a somewhat high
debt burden measured by MADS as a percentage of revenue of 15.3%, above
the Fitch median of 12.4%, which contributes to the low revenue-only
CONTINUE CURRENT PERFORMANCE: Fitch expects Goodwin House to sustain its
current financial profile and solid demand characteristics.
CAMPUS REPOSITIONING PROJECT: Although Goodwin House's Alexandria campus
repositioning project is approximately two years away, the looming large
capital plan tempers any positive rating action at this time.
Goodwin House is a Type A continuing care retirement community (CCRC)
that operates campuses in Alexandria, VA and Bailey's Crossroads, VA.
Goodwin House Alexandria (GHA) consists of 261 ILUs, 41 ALUs, and 80 SNF
beds. Goodwin House Bailey's Crossroads (GHBC) consists of 335 ILUs, 42
ALUs, 69 SNF beds, and 16 memory support beds. In fiscal 2013, Goodwin
House had total operating revenues $66 million.
RATING AFFIRMATION OF 'BBB'
The 'BBB' rating continues to be supported by Goodwin House's strong
balance sheet, good demand indicators, positive service area
characteristics, and adequate profitability generation that supports
solid MADS turnover entrance fee only debt service coverage. Fitch's
main credit concerns continue to be Goodwin House's low debt service
coverage by revenue only and large looming capital plans.
SOLID DEMAND IN A FAVORABLE SERVICE AREA
Goodwin House's solid demand characteristics help support the
organization's overall successful financial profile. Goodwin House has a
long history of operating in the Northern Virginia service area, which
is an additional positive credit factor. The primary markets of
Arlington County (general obligation [GO] bonds rated 'AAA' by Fitch)
and Fairfax County (GO bonds rated 'AAA' by Fitch) each have solid
population growth trends, high wealth levels, and a diverse economic
base. Additionally, entrance fees continue to be consistent with local
CAMPUS REPOSITIONING PROJECT
Management is currently preparing for a fairly significant campus
repositioning project at its Goodwin House-Alexandria campus, which is
expected to commence over the next 24 months. Positive rating pressure
continues to be limited at this time primarily due to the capital plans
and the organization's already sizeable debt burden. Fitch will evaluate
the project's impact on Goodwin House's credit rating so there is more
clarity surrounding the project.
Approximately 84% of Goodwin House's debt is fixed-rate and 16% is
variable-rate ($25 million). The LOC with Wells Fargo expires in July
2016. Goodwin House also has an outstanding swap with Allied Irish Bank
that had a negative mark-to-market valuation of $1.2 million as of March
31, 2014. However, Goodwin House has no collateral posting requirements
related to the swap, which expires in October 2015. Overall, Fitch views
the organization's debt profile as appropriate for the rating level.
Goodwin House provides quarterly utilization and financial information
to the MSRB's EMMA system. Fitch views Goodwin House's disclosure
practices as excellent, since it includes management discussion and
analysis and semiannual investor calls.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Not-for-Profit Continuing Care Retirement Communities Rating
Criteria', July 10, 2013.
Applicable Criteria and Related Research:
Not-for-Profit Continuing Care Retirement Communities Rating Criteria
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Source: Fitch Ratings