OREANDA-NEWS. Fitch Ratings has assigned a 'BBB' rating to the following bonds expected to be issued by the Maryland Health and Higher Education Facilities Authority on behalf of General German Aged People's Home of Baltimore (Edenwald):

--\\$49,365,000 revenue refunding bonds, series 2015.

The Rating Outlook is Stable.

The series 2015 bonds are expected to be issued as fixed-rate bonds. Bond proceeds, along with the release of the 2006A DSRF and other trustee-held funds, will be used to refund the series 2006A bonds, pay for renovations of one of Edenwald's dining facilities, as well as hallways of the Health Center, establish a DSRF and pay for costs of issuance.

SECURITY

The bonds will be secured by a pledge of Edenwald's gross revenues, a first mortgage lien and a debt service reserve fund.

KEY RATING DRIVERS

ROBUST LIQUIDITY POSITION: Edenwald's unrestricted liquidity position has grown by 21% over the last four audited years and increased further through the interim period (ended June 30, 2015). At June 30, 2015, Edenwald's 580 days cash on hand (DCOH), 71.2% cash-to-pro forma debt and a 9.3x cushion ratio all compared well to Fitch's 'BBB' medians of 408 days, 60.2% and 6.9x, respectively.

STRONG CASH FLOWS: Edenwald's net operating margin (NOM)-adjusted, supported by consistently strong entrance fee receipts, has averaged 22.1% over the last four audited years, above Fitch's 'BBB' median of 20.4%. In addition, improving cash flows resulted in steady debt moderation over the time period, as evidenced by debt-to-net available decreasing from 8.7x in 2011 to 6.2x in 2014, in line with Fitch's 6.3x median.

ADEQUATE DEBT SERVICE COVERAGE: Edenwald's cash flows produced solid average debt service coverage of 1.8x over the last four years, slightly below Fitch's median of 2x. Fitch notes Edenwald's heavy reliance on entrance fees to pay debt service as a credit concern. However, this is mitigated by historically strong net entrance fee receipts which have averaged \\$6.5 million annually over the last nine years.

FAVORABLE MARKET AREA: Edenwald is located in Towson, MD, part of Baltimore County (rated 'AAA'; Stable Outlook by Fitch). Edenwald's robust independent living unit (ILU) occupancy, averaging 91% over the last four years, is supported by a favorable market area characterized by solid real estate trends and a growing age and income-qualified population.

WEAK OPERATING PERFORMANCE: Edenwald's 118.3% operating ratio in 2014 was unfavorable when compared to Fitch's 'BBB' median of 97.4%. The outsized operating ratio is attributed to the organization's pricing model, its focus on resident wellness and individualized care, and limited direct admits into the skilled nursing facility (SNF).

RATING SENSITIVITIES

RELIANCE ON ENTRANCE FEE RECEIPTS: Given General German Aged People's Home
of Baltimore's (aka Edenwald) reliance on net entrance fee receipts to support operations and debt service coverage, Fitch would expect the facility to produce strong receipts that are commensurate with historical levels. Any significant deviation in net entrance fee receipts that negatively affects coverage could pressure the rating.

CREDIT PROFILE

General German Aged Peoples Home of Baltimore owns and operates Edenwald, a Type-A, lifecare, continuing care retirement community (CCRC) located in Towson, MD, about 15 minutes outside of Baltimore. Edenwald currently consists of 281 ILUs, 56 assisted living units (ALUs) and 71 private SNF units. Edenwald opened on the current campus in 1985 and was renovated and expanded in 2006 with the addition of 60 luxury ILUs located in a connected building called the Terrace.

ROBUST LIQUIDITY POSITION

Edenwald's unrestricted liquidity has grown at an average of \\$1.5 million per year for the last four years, increasing from \\$28.8 million at Dec. 31, 2011 to \\$34.7 million at Dec. 31, 2014. At June 30, 2015, Edenwald's \\$35.2 million in unrestricted cash and investments equated to 580 DCOH, 71.2% cash-to-pro forma debt and a 9.3x cushion ratio, all of which were above Fitch's 'BBB' medians. Management is projecting cash to continue increasing over the medium term, resulting in 625 DCOH and 89.4% cash-to-debt by 2017 year-end.

STRONG CASH FLOWS

Edenwald's adjusted net operating income has improved from \\$3.8 million in 2012 to \\$6.6 million in 2014, resulting in an improvement in NOM-adjusted from 17.8% to 25.6% over the time period. Improved cash flows are supported by stable and robust entrance fee receipts, which have averaged \\$6.5 million over the last nine years. Entrance fee receipts are expected to remain consistent with historical levels over the medium term, as the initial residents from the Terrace apartments begin to turn over in the coming years.

CCRC net-available has improved commensurate with net operating income over the recent years, going from \\$5 million in 2012 to \\$7.8 million in 2014, which resulted in an improvement in debt-to-net-available from 8.5x to 6.2x over the time period. Additionally, debt service coverage has been adequate over the last four years, and was at 2.1x in 2014, slightly above Fitch's median of 2x. Management is projecting 1.8x-1.9x coverage over the next three years.

STABLE OCCUPANCY

Edenwald's ILU occupancy has averaged 91% over the last four years and was 93% through the interim period. Occupancy is supported by a solid real estate market and a growing age and income-qualified population in the market area. Edenwald's strategy of keeping their residents healthy and out of the more expensive health center setting has been successful over the last four years, as evidenced by a very low average SNF occupancy of 71% over the time period.

WEAK OPERATING PERFORMANCE

Edenwald had an average \\$2.5 million loss from operations over the last four audited years, resulting in a very high average operating ratio of 120.5%, which was significantly unfavorable compared to Fitch's 'BBB' median of 97.4%. The negative operating performance is attributed to Edenwald's pricing model and its focus on resident wellness and individualized care. Edenwald runs a fully staffed medical suite on its campus seven days a week and its average nursing per resident day hours of 4.2 is significantly above the state average.

Additionally, Edenwald does not currently accept outside admits into its ALUs or SNF and does not participate in the Medicare program. While Fitch recognizes the strategic value of high quality, individualized care and focus on current facility residents, it notes that Edenwald's lack of access to incremental revenues from the ALUs and SNF hamper its operating performance and may cap the rating over the medium term.

DEBT PROFILE

Post issuance, the 2015 fixed-rate bonds will be the only debt outstanding. Edenwald does not have any swaps.