Southeast Housing, LLC, military housing revenue bonds were downgraded to Ba1 from Baa3 Thursday by Moody's Ratings, which cited weakening financial performance. Moody's also placed the rating on review for downgrade.
Moody's action affects $350 million of taxable Series 2007 Class I bonds.
"The downgrade reflects preliminary fiscal 2025 results showing notable weakening in financial performance, driven largely by higher expenses related to environmental remediation at Naval Air Station-Key West[, Florida]," Moody's said. The Department of Defense recently released findings that suggest sustained resources may be needed to address conditions at the installation.
Moody's has the rating under review for a further downgrade as it continues to assess the project's exposure to operational, capital and legal pressures and Southeast Housing's strategies to address them.
Based on preliminary numbers, Moody's expects coverage to have been 1.1 times in fiscal 2025, down from 1.35 times in fiscal 2024.
Moody's expects the federal Basic Allowance for Housing — funds awarded to U.S. armed service members for off-base housing — to be flat this year, after growth increased 5.4% annually from 2020-2025.
S&P Global Ratings downgraded the bonds to BBB from A-minus in November 2025.
Southeast Housing, LLC, is a project consisting of 5,258 housing units across 11 Navy bases located in Florida, Georgia, Mississippi, South Carolina and Texas.
Balfour Beatty Communities is the managing member and property manager for Southeast Housing, LLC. Balfour Beatty didn't immediately respond to a request for a comment.
