The Rating Outlook is Stable.
The bonds are secured by a pledge of gross receipts and mortgage on all property of the Springpoint Senior Living 1998
KEY RATING DRIVERS
STABLE FINANCIAL PROFILE: Springpoint's financial performance has remained largely stable over the last four audited years. In 2013, Springpoint posted a 99.1% operating ratio, a 7.5% net operating margin-adjusted, and debt service coverage of 1.5x. While all of these figures trail Fitch's 'BBB' category medians, they are very consistent with historical levels of performance.
IMPROVED OCCUPANCY: Independent living unit (ILU) occupancy improved to 83.7% in fiscal 2013 from 79% in fiscal 2011. Fitch expects occupancy to continue to strengthen, which should impact Springpoint's operating performance positively in the near- to medium-term.
MANAGEABLE DEBT BURDEN: Springpoint carries a light debt burden, as evidenced by maximum annual debt service (MADS) of 7.7% of revenue in fiscal 2013, compared to Fitch's 'BBB' category median of 12.4%. Springpoint OG's liquidity relative to debt also compares well to Fitch's 'BBB' medians.
OTHER CREDIT STRENGTHS: Springpoint is the largest not-for-profit senior living provider in
MAINTENANCE OF CURRENT PERFORMANCE: While Fitch expects Springpoint to maintain, or improve from, historical operating performance, any deterioration in operating profitability or entrance fee receipts could trigger rating pressure.
Springpoint OG consists of
STABLE FINANCIAL PROFILE
Springpoint's financial profile has remained consistent over the last four audited years. From 2010 to 2013, Springpoint's operating ratio averaged 99.1% and its net operating margin-adjusted averaged 7%, relative to Fitch's 'BBB' category medians of 97.2% and 21.3%, respectively. Debt service coverage by turnover entrance fees over this period ranged from 1.4x to 1.6x, relative to a median of 1.9x. While most of Springpoint's financial metrics trail Fitch's 'BBB' category medians, the organization's size, seasoned management team, operational longevity, and stable performance help mitigate some of the concerns of the weaker financial performance.
Five-month 2014 interim period results show a year-over-year improvement in performance, with the operating ratio at 96.6%, net operating margin-adjusted at 6.2%, and coverage at 1.2x, compared to 2013 five-month results of 99.1%, 3.8%, and 0.7x, respectively. Revenue-only debt service coverage was solid as well at 1x. Springpoint's revenue-only coverage is a credit strength and has remained at, or above, the Fitch 'BBB' median of 0.9x through the four-year historical period.
Improving ILU occupancy has helped operational performance. In 2013, Springpoint's ILU occupancy climbed above 80% and has remained above 80% in the interim period, after being at approximately 79% over the prior two years. Improvements in occupancy have been driven by stronger marketing and an improving housing market.
DEBT AND LIQUIDITY PROFILE
Fitch views Springpoint's manageable debt burden, as indicated by MADS as a 7.7% percent of revenue in fiscal 2013, as a key credit strength at the current rating level. The low debt burden eases the pressure on Springpoint's operations.
Liquidity has remained very stable over the last four years and through the interim period. At
DEBT PROFILE & CAPITAL PLANS
Fitch views Springpoint's overall debt structure as aggressive for the rating category, with approximately 87.5% of its
Springpoint's capital spending has averaged approximately 75.9% of depreciation over the last four years and Fitch expects this level of spending to continue, with Springpoint funding mostly routine capital projects and apartment refurbishments. Springpoint's average age of plant is slightly elevated at 14.3 years.
The largest project Springpoint is contemplating is a potential
Outside the OG, Springpoint owns three other CCRCs, as well as 18 affordable housing projects. Springpoint's newest CCRC,
The new building at Atrium at
Historically, Springpoint has transferred funds or provided loan guarantees to non-obligated group affiliates, which has been scaled back in recent years. Fitch continues to monitor the level of support to non-obligated group entities and the impact to the OG's performance.
Springpoint provides quarterly utilization and financial information to bondholders upon request.
Additional information is available at 'www.fitchratings.com'
-- 'Rating Guidelines for Nonprofit Continuing Care Retirement Communities (
Dmitry Feofilaktov, +1-212-908-0345
Source: Fitch Ratings
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