Standard & Poor's Rating Services said it lowered its long-term rating and underlying rating (SPUR) to BB-plus from BBB-minus on Washington State Housing Finance Commission's existing debt issued for Wesley Homes Inc.
The outlook is stable.
"The lowered rating reflects Wesley's weak operating performance over the past few years," said Standard & Poor's credit analyst Geraldine Poon. "While overall occupancy has improved slightly from the prior year, it remains below budget."
Management has been working to improve operations; for example, the recently introduced monthly rental model at the Des Moines campus has aided revenue growth. Management also plans to control costs through reduction of full-time equivalents (FTEs).
Although operating liquidity continues to provide a financial cushion, the rater considers the continued weaker operating results a significant credit risk. In addition, a recent increase in debt further strains the financial profile, and there are also possible additional capital and debt plans.
Wesley Homes has two main Washington facilities, one in Auburn and one in Des Moines. It targets a middle-income market and believes this underserved niche is capable of supporting additional growth in the future.
