Fitch Affirms Arbor Acres United Methodist Retirement Community, NC's Series 2007 Bonds at 'A-'
NEW YORK-(Business Wire)-September 24, 2009 - Fitch Ratings has affirmed the 'A-' rating on the $18,000,000 North Carolina Medical Care Commission's (Arbor Acres United Methodist Retirement Community) series 2007 bonds. The Rating Outlook is Stable.
The affirmation is supported by Arbor Acres' excellent debt service coverage over the past four years, consistently high occupancy, sound liquidity relative to expenses, and solid service area characteristics. Arbor Acres has demonstrated strong all-in debt service coverage of over 3.0 times (x) in each of the past four years while maintaining high occupancy rates above 90% in each level of care. In addition, the facility maintains a waitlist of approximately 150 people. At June 30, 2009, Arbor Acre's unrestricted cash and investments resulted in a solid liquidity position of 411 days cash on hand, cash to debt of 90%, and a cushion ratio of 12.1x. Arbor Acres' service area is favorable as Fitch rates the general obligation (GO) bonds for both the city of Winston Salem and Forsyth County 'AAA'.
The main current credit concern is an upcoming debt issuance expected in 2010 to help fund a $20 million to $30 million campus repositioning project. Arbor Acres plans to add 30 licensed beds (12 memory, six assisted living and 12 skilled nursing) and relocate all of its assisted living units to a new building to be constructed. Arbor Acres has secured state approval for the additional beds. Fitch will evaluate the debt issuance and its effect on the rating at the time the debt is incurred. Arbor Acres does have debt capacity at its current rating. Additionally, Arbor Acres will be bringing on line eight new independent living units (ILUs), self-funded by entrance fees, adding 17 additional ILU apartments with the repositioning project, and constructing 20 new ILU houses also to be funded by entrance fees on land adjoining Arbor Acre's current campus. These new ILUs should bring in additional revenue with minimal associated expenses which should help Arbor Acres absorb any new debt.
The Stable Outlook reflects Fitch's expectation that Arbor Acres will continue to maintain solid occupancy rates and operational performance, which will support stable liquidity and coverage figures.
Located in Winston Salem, NC, Arbor Acres is a type C continuing care retirement community consisting of 225 independent living units, 84 assisted living units, and 53 nursing beds. Arbor Acres has covenanted to provide annual audited financial statements within 120 days of its fiscal year-end and unaudited financial statements within 45 days of each fiscal quarter; financial disclosure is made on the Electronic Municipal Market Access. Fitch views Arbor Acres' disclosure language favorably.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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