The Rating Outlook is Stable.
The bonds are secured by a mortgage on GOG's facilities, a gross revenue pledge and a debt service reserve fund.
KEY RATING DRIVERS
LIGHT, BUT STABLE CASH POSITION: The 'BB+' rating reflects GOG's light liquidity metrics. At the end of fiscal 2016 (
MODEST DEBT SERVICE COVERAGE: GOG's moderately high debt burden combined with limited net entrance fee receipts results in modest coverage of maximum annual debt service (MADS) of 1.7x and 1.6x in fiscal 2016 and 2015, respectively. However, revenue-only MADS coverage is solid at 1.3x in fiscal 2016 given GOG's higher proportion of ALU and SNF service revenue.
ENDURING OPERATING HISTORY: GOG has a long history of operating in each of its three service areas dating back to 1967, which Fitch views as a key credit strength. GOG's unit mix is composed of a higher proportion of assisted living unit (ALU) and skilled nursing facility (SNF) beds relative to other continuing care retirement communities (CCRCs), which helps serve as a differentiator in a somewhat competitive marketplace.
RELATIONSHIP WITH GREENCROFT RETIREMENT COMMUNITIES: All three GOG entities are affiliate entities of
SOLID OCCUPANCY LEVELS: As a result of focused marketing efforts and a healthy real-estate market, GOG's independent living unit (ILU) occupancy levels remain healthy and averaged 92.8% in fiscal 2016. In addition, ALU occupancy of 92.8% improved over the prior year levels as a result a new tiered pricing strategy based on level of service that made COG's services more competitive. In addition, SNF occupancy remains very good and averaged 91.2% during fiscal 2016.
SUSTAINED FINANCIAL PERFORMANCE: Given
GOG consists of three separate type-C CCRCs (Greencroft Goshen - located in
Long Operating History and Relationship with GRC
GOG has a long history of operating in each of its three northwest
GOG's business line diversity with a greater proportion of ALU and SNF revenues are a point of differentiation in a somewhat competitive market. Additionally, ALU and SNF resident service fees help generate relatively consistent earnings that supports good revenue-only MADS coverage. Regardless, Fitch views GOG's heavy reliance on SNF revenues and its
Supplemental Medicaid Payments
This structure allows GOG to share the additional upper payment limit funds with
The series 2013 bonds were used fund a two-story addition to the SNF at Greencroft Goshen, which accommodates up to 66 residents and created more private rooms. Along with the SNF construction, GOG made parking lot renovations and created a new entryway to the campus. The expanded and renovated SNF received its certificate of occupancy in
GOG's debt position is moderately high with MADS representing 13.3% of revenues in fiscal 2016. Adjusted debt to capitalization of 96% and debt to net available of 8.2x are somewhat unfavorable to Fitch's below investment grade medians of 78.4% and 7.6x, respectively in fiscal 2016. Management does not anticipate any capital plans that will result in additional debt issues over the next two years.
GOG covenants to provide annual and quarterly occupancy and financial statements through the MSRB's EMMA system.
Additional information is available at 'www.fitchratings.com'.
Not-for-Profit Continuing Care Retirement Communities Rating Criteria (pub.
Revenue-Supported Rating Criteria (pub.
Dodd-Frank Rating Information Disclosure Form
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