Fitch Affirms Moorings Park (FL) Bonds at 'A '; Outlook Stable
--\$8.5 million series 2000 bonds;
--\$27 million series 2005 bonds;
--\$34.8 million series 2008 bonds.
The Rating Outlook is Stable.
All three series of bonds are backed by direct pay letters of credit (LOCs) from JPMorgan Chase Bank (JPMorgan; rated 'A+/F1'/Outlook Stable by Fitch). The respective LOCs all expire in April 2018.
SECURITY
The bonds are secured by a gross revenue pledge and mortgage pledge.
KEY RATING DRIVERS
EXCELLENT FINANCIAL PERFORMANCE: Moorings' excellent financial profile continues to be highlighted by a strong liquidity position, consistent operating profitability, and solid levels of pro forma debt service coverage.
STRONG DEMAND FOR SERVICES: Independent living unit (ILU) occupancy is at an all-time high of nearly 100% occupied (Dec. 31; unaudited), which was up from fiscal 2011's 92%. Overall, Fitch views Moorings' strong demand for services as a primary credit strength that helps sustain its excellent financial profile.
MOORINGS PARK AT GREY OAKS CAPITAL PROJECT: Moorings' is currently in process of developing a new community, Moorings Park at Grey Oaks (MPGO) approximately four miles from its current campus. The capital improvement plan calls for the project to be built in four phases consisting of 96 ILUs, 16 assisted living units (ALUs) and 48 memory support units with final construction completion and fill-up expected by 2017. To date, 95 of 96 ILUs are presold with 50% deposits, which Fitch views favorably.
FAVORABLE SERVICE AREA CHARACTERISTICS: Moorings has a long operating history of serving a niche market of affluent residents in Naples, Florida dating back to 1981. Additionally, Naples, FL. is viewed as a retirement destination, which enables Moorings Park to draw residents from beyond its local area.
RATING SENSITIVITIES
NEW DEBT ISSUANCE: Management intends to issue approximately \$135 million of series 2015 bonds within next 30-60 days, which will refinance all Moorings' outstanding debt as well as provide approximately \$45 million to pay a portion of the development/ acquisition costs related to MPGO. The expected structure will consist of 50% fixed rate bonds and 50% direct bank placed debt and has been factored into the rating affirmation. Fitch expects to rate the series 2015 bonds closer to the date of issuance and will assess the final structure of the series 2015 bonds, factoring in any material changes to the credit profile at that time.
MOORINGS PARK AT GREY OAKS SUCCESSFUL COMPLETION: As Moorings continues with its strategic and capital improvement plan to development its MPGO community Fitch will monitor for successful construction completion and fill-up of each phase. Fitch would view unfavorably any significant construction delay and/or cost overrun that impacts Moorings.
CREDIT PROFILE
ORGANIZATIONAL OVERVIEW
Moorings Park is a type-A continuing care retirement community located in Naples, FL. The community consists of 384 independent living units, 73 assisted living units, and 106 skilled nursing beds. In the year ended Dec. 31, 2014 (unaudited), Moorings Park had total revenues of approximately \$68.9 million. Moorings Park covenants to provide annual and quarterly financial statements to bondholders.
RATING AFFIRMATION OF 'A+'
The rating affirmation of 'A+' is supported by Moorings' excellent financial profile and strong demand for services. At Dec. 31, 2014, Moorings Park had \$177.4 million in unrestricted cash and investments, which equated to 1,340 days cash on hand, 23.7x pro forma cushion ratio, and 130.6% cash to debt. These metrics compare favorably to Fitch's 'A' category medians of 692 days, 15.8x, and 127.2%, respectively. Additionally, these metrics already assume issuance of \$45 million of series 2015 bonds to fund the MPGO project. Fitch used pro forma maximum annual debt service (MADS) of \$7.5 million in its calculation compared to existing MADS of approximately \$5.5 million.
In fiscal 2014, Moorings recorded \$5.3 million in operating income, a 94.4% operating ratio and net operating margin-adjusted of 24.1% which is consistent with historical performance. The organization's solid profitability along with improved occupancy results in good pro forma debt service coverage of 3.8x, which was consistent with Fitch's median of 3.7x. The strong financial performance continues to be driven by Moorings' long history in the market place of providing lifecare services to a very affluent population base. Over the past five years, occupancy has been solid averaging 95% in ILUs, 92% in assisted living units (ALU), and 93% in skilled nursing.
MOORINGS PARK AT GREY OAKS
Moorings Park at Grey Oaks will consist of 96 new ILUs built in three separate 32-unit phases with final completion in 2017. Additionally, Phase IV of the project will consist of 16 ALUs, 48 memory support units, a clubhouse, and other various amenities for the new community. Thus far, the project is nearly 100% presold, on budget, and ahead of schedule. Additionally, the development and construction costs have been funded by a local real estate developer with the Moorings responsible for marketing costs. Upon the completion and fill-up of each phase, Moorings Park will become the owner of the new unit expansion. The series 2015 financing will be used to pay a portion of the acquisition cost from the developer. Fitch toured the MPGO site and views the development strategy to expand Moorings' presence in an affluent portion of Naples favorably, which should enable future organizational growth over the long-term. Successful completion of the project will increase Mooring's revenue base, thereby decreasing the pro forma debt burden.
OUTSTANDING DEBT PROFILE
Total outstanding debt was \$93.5 million as of Dec. 31, 2014. Fitch views Moorings' current debt profile as aggressive with nearly 75% of outstanding debt in variable-rate demand bonds (VRDB). However, Moorings intends to issue approximately \$135 million of series 2015 bonds within next 30-60 days which, will refinance all outstanding debt as well as provide approximately \$45 million to pay a portion of the development/ acquisition costs related to MPGO. The pro forma debt structure is anticipated to be approximately 50% traditional fixed rate bonds and 50% fixed rate debt directly placed with Bank of America for a 10-year term.
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