OREANDA-NEWS. Fitch Ratings has affirmed the 'BBB' rating on the following South Carolina Jobs-Economic Development Authority Economic Development Revenue bonds, issued on behalf of Park Pointe Village (PPV):

--$24.1 million series 2012.

The Rating Outlook is Stable.

SECURITY
The bonds are secured by a pledge of gross revenues and a mortgage lien on obligated group property.

KEY RATING DRIVERS
AFFILIATE OF ACTS: Since 2011 PPV has averaged a healthy 95% operating ratio and a net operating margin-adjusted (NOMA) above 30%, both favorable to Fitch's 'BBB' respective category medians of 96.1% and 19.3%. Fitch believes PPV's strong operating performance has been supported by its position as an affiliate of the ACTS organization (revenue bonds rated 'A-'/Outlook Stable), which provides significant operating, marketing, and strategic support via a management agreement.

SUFFICIENT LIQUIDITY: A very conservative investment structure and limited near-term capital needs are expected to preserve PPV's liquidity. As of Sept. 30, 2015, PPV had $10.1 million in unrestricted cash and investments, equal to 414 days of cash on hand (DCOH) and a 6.9x cushion ratio, versus Fitch's 'BBB' category medians of 400 DCOH and 7.3x cushion ratio.

DEBT STRUCTURE RISK: Fitch's primary concern relates to PPV's debt structure, which is 100% direct placement with a five-year term (2017), after which the debt faces renewal and put risk. With only 43.1% cash-to-debt at Sept. 30, 2015 the rating incorporates these risks as well as an assumption that current debt structure will be extended or remarketed into another mode.

STEADY OCCUPANCY: Since opening its independent living unit (ILU) expansion in 2010, PPV has produced year-over-year improvement in its occupancy through stabilization. Occupancy has remained above 90% consistently since 2012, and is expected to generate at least 10 unit turnovers and $2.5 million in net entrance fees annually going forward, sufficient to support coverage at or above the 'BBB' category median of 2x.

LIMITED OPERATING SCALE: PPV's relatively small revenue base of $11.9 million and single-site operating platform presents some inherent risk of operating volatility. However, Fitch believes this risk is mitigated somewhat by the management agreement with ACTS Management Services (ACTS) which has been in place since 2005 and is expected to be maintained going forward.

RATING SENSITIVITIES
INCREASED ILU TURNOVER: Through Sept. 30 2015, Park Pointe Village (PPV) generated a light $467,000 in net entrance fees, due to weaker than expected turnover. Fitch expects PPV to generate another $1.5 million in net entrance fees by year end, increasing coverage from 1.2x at Sept. 30 2015 to near 2x by year end. Evidence that weaker ILU turnover is persisting into 2016 could prompt a negative rating or Outlook revision.

FUTURE CAPITAL PLANS: The rating reflects Fitch's expectation that PPV will sustain steady operating cash flow allowing for debt moderation over the medium term. Over the longer term, it is likely that PPV will explore opportunities to further expand its unit complement within a master facility plan. While these plans are just in the exploratory stage, Fitch expects to remain informed of developments and will take rating action as necessary.

CREDIT PROFILE
Park Pointe Village (PPV) is a not-for-profit Type 'A' CCRC located on a 62-acre parcel in the city of Rock Hill, York County, SC, approximately 30 miles south of Charlotte, NC. The community consists of 162 ILUs, 20 ALUs, and 40 SNF units. In fiscal 2014 (December 31 year-end), PPV reported total revenue of approximately $11.9 million.

PPV is managed by ACTS Management Services, an affiliate of ACTS Retirement-Life Communities and ACTS is PPV's sole corporate member. ACTS is one of the largest non-profit CCRC systems in the nation with 23 owned or affiliated communities across eight states, and $363 million in 2014 operating revenues.

STEADY PROFITABILITY EXPECTED
Despite interim softness in net available, Fitch expects PPV to sustain NOMA near the median going forward, supporting debt service coverage at or above median levels. Through nine months ended September 30, ILU occupancy remained high at 98%; however, net entrance fee receipts are much lower than budgeted. As a result, net available of $1.3 million generated only 1.2x coverage of maximum annual debt service (MADS) through the three-quarter interim period, well below expectations. However, PPV management expects that additional turnover in the final quarter of 2015 will generate sufficient net entrance fees to bring coverage back to near 2x. Further, turnover is budgeted to rebound in 2016, generating closer to $3 million in net entrance fees and close to 3x debt service coverage, which is more consistent with PPV's recent historical levels.

Fitch notes that PPV has a 1.2x debt service coverage covenant under its bank documents; however, for the Sept. 30, 2015 period, debt service coverage was 1.58x per covenant calculations (based on a rolling 12 months).

LEVERAGE & CAPITAL NEEDS
Fitch expects capital needs to remain manageable near $2.3 million in 2016 and beyond, which is near depreciation. PPV's healthy level of spending has kept average age of plant low at 6.2 years through Sept. 30 2015, well below Fitch's 'BBB' category median of 11.5 years. Steady operating cash flow coupled with a conservative asset allocation and no pension exposure is expected to support moderation in leverage over the next several years. Future capital plans include a possible campus renovation and expansion over the longer term, which has not been factored into the rating.

DEBT STRUCTURE
PPV's $24.9 million in series 2012 debt is directly placed with BB&T. The bonds are currently set at a fixed rate of 2.79% through the initial term (February 2017) and amortize over 24 years (through 2036). Debt service is level with MADS equal to $1.5 million.

DISCLOSURE
PPV covenants to provide quarterly (within 45 days) and annual (within 120 days) disclosure via the municipal securities rulemaking board's EMMA system.