Fitch Ratings said it has upgraded the rating on approximately $14.7 million Massachusetts Development Finance Agency (Brookhaven at Lexington) outstanding bonds to A-plus from A, including: $6.8 million fixed-rate first mortgage revenue bonds, series 2005A; and $7.9 million variable-rate first mortgage revenue bonds, series 2005B.
The rating outlook is stable.
Debt payments are secured by a pledge of the gross revenues of the obligated group, a first mortgage lien on the land and buildings and a debt service reserve fund.
The upgrade to A-plus is a result of a very robust liquidity position with over 1,200 days cash on hand, 434% cash to debt, and 35.7x cushion ratio, all more than double the respective A category medians. The significant balance sheet strength provides a very deep financial cushion versus potential operating volatility resulting from its position as a single-site provider in a competitive market.
Brookhaven's core operating profitability is very strong for a Type-A contract community with an operating ratio of 87% through the nine months ending June 30, 2014 and net operating margin of 9.9% during the same time period.
Brookhaven's debt burden is relatively light for the category with maximum annual debt service (MADS) equal to 6.9% of fiscal 2013 revenue compared to the A category median of 8.9%. MADS coverage was in line with the median in fiscal 2013 at 3.0x, but somewhat light compared to 5.9x the prior year, reflecting low turnover. MADS coverage has rebounded to a very strong 6.7x at June 30, 2014. Revenue-only coverage was a solid 1.6x in fiscal 2013 and 2.9x at June 30, 2014.
As a result of its location in a desired service area, Brookhaven has been able to maintain solid occupancy over the last six years. Since 2008, occupancy in the independent living units (ILUs) has not been less than 94% and average occupancy was 97% in 2013 and 97.1% through the nine months ended June 30. Similarly, occupancy in the assisted care units (ACUs) has remained over 92% over the last four years. Occupancy in its skilled nursing facility (SNF) has ranged from 71%-90% over the same time period, reflecting its policy of direct admits only.
