Several newer CCRCs funded during this period remain challenged due to slower than anticipated fill-ups and lower than projected entrance fee receipts, which in turn were caused by discounting attributable to the sharp decline in housing prices. Many projects have come under pressure due to lower entrance fee collections and slower fill rates. Those lowered revenues impacted operations and the CCRCs' ability pay down temporary debt structures, which has driven some into bankruptcy.
In contrast, many of the mature nonprofit CCRCs rated by Fitch were better positioned to weather the financial challenges experienced during the economic downturn. They also benefited from good locations, successful operating histories and were generally able to maintain entrance fee prices consistent with local area housing prices even in markets that saw material drops in housing prices. And, their management teams proved adept at controlling expenses and developing creative marketing strategies to generate move-ins.
In 2014, Fitch expects mature CCRCs to continue to benefit from improving economic fundamentals and the continued rise in residential real estate prices. Year to date, affirmations remain Fitch's most common rating action in the sector.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
U.S. Public Finance
U.S. Public Finance
Source: Fitch Ratings
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