The Rating Outlook is Stable.
The bonds are secured by a gross pledge, first mortgage lien, security and interest in residency agreements, and a debt service reserve fund.
KEY RATING DRIVERS
SLIGHTLY ELEVATED DEBT BURDEN: In 2014, VL issued
STRONG OVERALL OCCUPANCY: VL maintained strong occupancy across all levels of care in 2013 with 97% independent living unit (ILU), 93% assisted living unit (ALU) and 87% skilled nursing facility (SNF) occupancies. Fitch views VL's continuously strong occupancy as a primary credit strength.
SOLID OPERATIONS: Offsetting its debt burden are VL's consistently strong operations, which have been supported by robust occupancy metrics over the last four fiscal years. In fiscal 2013 (
MODERATING CAPITAL NEEDS: VL's capital needs will begin to moderate after the completion of its campus renovation project in 2014. VL's 2015 capital budget will be slightly elevated at
FAVORABLE SERVICE AREA CHARACTERISTICS: VL is located in
MAINTENANCE OF CURRENT FINANCIAL PROFILE: Fitch expects VL to maintain their strong occupancy and solid operating profile which should support balance sheet growth and sufficient debt service coverage.
Vicar's Landing is a Type A life-care continuing care retirement community (CCRC) consisting of 227 ILUs, 38 private ALUs, and 60 SNF beds. The community is located approximately 20 miles southeast of downtown
SLIGHTLY ELEVATED DEBT BURDEN
As VL draws down on the remainder of the series 2014 direct placement bonds its total debt will equal approximately 51% of its unrestricted cash, based on the six-month interim figures. Although pro forma MADS is estimated to increase to
VL's campus includes nine apartment buildings, 15 patio homes and a community building, all of which are 25 years old. Funds from the bond proceeds will be used to build a new community center, replacement of the siding and windows on the apartments and patio homes as well as a variety of other renovations. Fitch views the projects positively as they will continue to keep VL's campus marketable for the long term.
STRONG OVERALL OCCUPANCY
VL is currently 100% sold and occupied in its ILUs. However, due to renovations of turnover apartments a number of residents have yet to move in, which has delayed the receipt of entrance fees on turnover units leading to weakened coverage. Coverage dropped to a low 0.9x through the six-month interim period. Management expects a number of new residents to move in over the coming months and reports receiving approximately
VL maintains an ongoing wait-list of over 200 prospective residents which should ensure further occupancy stability over the medium term. Through the interim period ALU and SNF occupancies have been below historical levels at 82% and 80%, respectively; however, this is less of a credit concern given VL's Type-A contract.
VL's operating ratio of 88.7% in fiscal 2013 exceeds the 'BBB' category median of 97.2% and is very strong given VL's type-A contract. The six month interim operating ratio was 96.3% closer to historical levels. Net operating margin was 9.4% over the same time period, in line with category median of 9.9%, while net operating margin-adjusted was 13.3%, improved from 11.3% through the same prior year period.
VL has historically provided financial support to its sister-facility, Glenmoor Retirement, a Type-A CCRC located in
MODERATING CAPITAL NEEDS
After the completion of its renovation project in 2014, VL is expecting to build a
DEBT PROFILE & DISCLOSURE
Fitch views VL's debt profile as moderate, consisting of approximately 76% fixed-rate and 24% variable-rate debt with no outstanding swaps. VL's covenants to provide annual and quarterly disclosure through the Municipal Rule Making Board's EMMA system. Throughout the credit review process, management was candid and timely in its responses to Fitch.
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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